Ontario leads the way to clean energy credit registry
On September 26, 2022, Microsoft Canada and Ontario Power Generation (OPG) announced an important agreement for clean energy credits (CECs). The most significant part of the deal was the fact that OPG would supply the credits from its nuclear and hydro-electric plants. Microsoft will procure the credits on an hour by hour basis to match the consumption of its data centers and other energy consuming activities.
Coming from one of the biggest of the Big Tech firms, Microsoft’s action could stimulate a major change in the clean energy landscape, with all non-emitting power sources being treated more equally and their product being more fairly valued against the CO2-intensive hydrocarbons that still dominate the energy market.
Matching consumption as it happens with clean energy allows the company to move closer to its stated 100/100/0 goal, which the company defines as 100 percent of electrons, 100 percent of the time supplied by zero CO2 sources. By shifting its own consumption pattern to meet this goal, the company hopes to move closer to a vision where all of the world’s grids achieve the standard.
The inclusive CECs that Microsoft has agreed to purchase are an expansion of the older, less inclusive system of renewable energy credits (RECs) that have played an important role in making wind and solar power development an attractive investment. Income from RECs has long given developers a return on the clean energy characteristics of their power plants and significantly increased the rate at which the power plants were erected.
Agreement has far reaching implications
The agreement between Microsoft and OPG includes collaboration on the development of a trading, tracking and accounting system using Microsoft’s Azure cloud computing platform. Scaling the system that the companies are developing will increase its climate impact enabling a broader range of providers and customers to participate in a process that recognizes value of clean energy that matches demand when it occurs.
In 2021, the global renewable energy credit market was estimated to be worth more than $12 billion and projected to grow to more than $100 billion by 2030. Though relatively small compared to the amount of capital being deployed in building renewable energy projects, REC income helps make the investment case and speeds development.
Though clean energy credits that value the environmental attributes of hydro and nuclear power are not entirely new, previous programs have been isolated to narrowly defined plants facing specific economic challenges. They were designed to provide a minimal lifeline to prevent plant closure rather than to provide investment incentives or a recognition of the higher value that clean power deserves in a world facing dire threats from climate change.
Developing a clean energy registry in Ontario
OPG/Microsoft’s agreement is a prelude to Ontario’s evolving process of creating a clean energy registry. As it is currently envisioned and described, the system is limited to purchases by Ontario businesses from Ontario suppliers.
The intent of the CEC registry is to offer Ontario industry and consumers a transparent tracking system that shows voluntarily purchased CECs that have been generated in Ontario.
Province of Ontario “Development of a Clean Energy Credit Registry”
In August 2022, Ontario posted a description of its proposed clean energy registry and requested comments. The comment period closed on September 16. The Ministry of Energy is now developing the system and expects it to be operational in early 2023. The Ministry of Energy provided Atomic Insights with a brief summary of their reasons for developing the system and the expected results once the system is operational and being voluntarily adopted.
As environmental and sustainability goals increasingly influence corporate decisions on where to invest and grow, Ontario is leveraging our province’s world class clean electricity grid by launching a voluntary CEC registry to boost competitiveness and attract jobs.
Ontario is continuing its strong economic recovery from the COVID-19 pandemic. Along with our highly skilled workforce, available tax credits, and a world-class research and development ecosystem, a CEC registry will contribute to Ontario’s attractiveness as a top destination for manufacturing investment by allowing businesses to meet their corporate sustainability goals and demonstrate that their electricity has been sourced from clean resources.
Revenue from CEC sales could also provide value for ratepayers and support the future development of new clean energy projects in the province.
This would help to keep costs down for Ontario families, support electrification and help the province reduce emissions even further.
We anticipate the Clean Energy Credit registry will be operational by early 2023.
Email to Atomic Insights from Ministry of Energy Communications Branch Oct 6, 2022
Will nuclear and hydro CEC sales help increase clean energy production?
It might be a mere coincidence, but three days after announcing that it had sold clean energy credit sale to a very large company, Ontario Power Generation announced that it was going to keep operating the Pickering nuclear power plant through at least 2026. That decision was the result of a request by its sole shareholder, the Province of Ontario.
The short extended period of operations will provide OPG with the time to conduct a reevaluation of its 2009 decision to close Pickering and replace its output with natural gas power production. That 13-year old decision came soon after the global financial crisis and the fracking boom. At the time, even the Sierra Club was calling natural gas clean. Times and the market have changed significantly.
Atomic Insights asked the OPG Media Relations Office if the Pickering announcement and the clean energy program announcement were related.
The Clean Energy Credit market in Ontario is still nascent, as is the market for credits from nuclear facilities, and will need time to develop. OPG will continue to monitor the market as it evolves, and factor any insights and value drivers that can be used into future investment decisions. We are encouraged that Microsoft, an environmentally driven large technology company, with a global footprint, is including nuclear energy in its clean power mix and recognizing the value of nuclear and hydro as clean, baseload generation required in the energy mix to drive to net zero.
Email response to Atomic Insights from Kim Lauritsen, OPG VP – Energy Markets Oct 6, 2022
If the closure decision had not been changed, Ontario’s greenhouse gas emissions would have quickly increased by 2.1 million metric tons per year.
Though it is an exciting development for clean energy, the decision to keep operating Pickering still needs approval.
OPG requires approval from the Canadian Nuclear Safety Commission (CNSC) for its revised schedule. The CNSC, which employs a rigorous and transparent decision-making process, will make the final decision regarding Pickering’s safe operating life. OPG will continue to ensure the safety of the Pickering facility through rigorous monitoring, inspections, and testing.
Ontario Supports Plan to Safely Continue Operating the Pickering Nuclear Generating Station
It is unlikely that the deal with Microsoft will be an isolated occurrence. There are dozens of other large companies, some in the same data center operations business as Microsoft, that have made pledges to power their operations with clean energy that matches demand at the time it exists.
Objections from critics
Despite all of its claimed and potential benefits, the deal has not received universal approval. Critics, some of whom are habitually opposed to nuclear and large hydro, have provided several reasons for their opposition.
- The arrangement rewards existing power plants whose power is already under contract for something they are already doing. It does not automatically result in additional clean energy.
- Allowing OPG’s large volume of clean energy, roughly 27 GWe, into the offset market would flood the market, reducing the value of RECs and PPAs for renewable energy sources like wind and solar.
- There has been no commitment from OPG and no requirement from Ontario that the income from CECs would be directed to development of new clean energy sources
- Using income from selling CECs to reduce electricity bills would subsidize customers and cause them to use more electricity, presumably from burning natural gas.
- Sales of clean energy credits to customers outside of Ontario would reduce the cleanliness of Ontario’s power production. It would be double counting to claim a clean grid while selling the attribute of cleanliness to a third party.
Note: Above points have been compiled from several sources that have offered different versions of similar objections. The Atmosphere Fund (Bryan Purcell), Environmental Defense (Lana Goldberg), The City of Ottawa (Mike Fletcher) and Climate New Network Energy Mix (Clifford Maynes).
The objections have a varying degree of validity.
Subsidizes actions that would have been done anyway
Though it’s true that Ontario’s hydroelectric dams and nuclear power plants were built several decades ago, it is less true that their electricity production already exists. Every kilowatt hour they produce is a new kilowatt hour that did not exist and is immediately consumed.
Recent history in both Canada and the United States shows that nuclear plants that do not generate sufficient revenue are vulnerable to being shut down. When that happens, they stop creating new clean kilowatt hours. Convincing large companies like Microsoft to pay more for electricity that is worth more because it is clean helps keep those old plants operating.
The objection has more validity for plants that are under contract, but electricity sales contracts generally cover only a moderate period of time. When the contract expires, CECs should be part of the new negotiation.
New CECs will flood the REC/PPA market
The new CECs will initially tip the supply-demand balance in favor of customers. Said another way, they will reduce market prices. But the availability of clean energy credits that can be combined with both firm and variable sources of clean energy to match demand as it occurs could increase the size of the customer base enough to overcome the effect, eventually making all clean energy worth a higher price for customers.
No commitment to use CEC income for more clean energy projects
Ontario is not yet requiring OPG to use the income from CECs to expand its clean energy generation, but the province has requested the extension of Pickering and is strongly supporting OPGs program to build small modular reactors (SMRs) and micro modular reactors (MMRs).
Those programs will be more cost effective in jurisdictions where clean energy fetches a higher price than dirty energy. Big companies and governments are presumably aware of the fungibility of money and the emptiness of promises to use a certain category of income for certain designated purposes.
Using CEC to reduce customer costs
The objection to using income from CECs to reduce costs for consumers reveals something almost sinister among those who object to the program. In today’s market, electricity customers, a group that includes every resident, are stressed by inflationary pressures.
Those pressures are especially worrisome for products like electricity whose use cannot be avoided. With lower electricity prices, customers are likely to celebrate lower monthly bills and shift the dollars to food, medicine and rent. Using more electricity is probably much lower on their list of items they want to buy.
Potential for double-counting if sold outside province
There are good reasons for concern about the effects of CEC sales to customers located outside of Ontario. Claiming cleanliness of Ontario’s grid while simultaneously selling the attribute of clean electricity outside of Ontario is a double-counting tactic that was pursued under the SPEED program in Vermont. It is a practice that must be avoided. As currently described Ontario’s clean energy registry is limited to customers in Ontario from suppliers in Ontario, but this part of the plan deserves careful tracking to make sure it isn’t changed in ways that degrade the program.
Bottom Line: A credible, well structured clean energy registry that allows participation in a technology neutral fashion accessible to both new facilities and established facilities helps clean energy fetch a higher price than dirty energy. It is an important incentive for companies and outside investors to direct their money to systems that reduce emissions and fossil fuel dependence.
Back when I was a student at UC Berkeley, the idea of “nuclear-free
zones” was popular among Berkeley’s political protesters. Actively
opposing nuclear weapons that could lead to Armageddon was an easy
way to drum up popular support for anything remotely related to
nuclear weapons and infrastructure without having to think too hard
about it. Local opposition is easy to build if you have a bullhorn,
a clipboard, and some picket signs.
Many people who graduated from UCB with liberal arts degrees but
lacked credentials for the best paying technical jobs naturally
gravitated towards law school. Once there, they learned how to
effect seemingly durable change and make money at bolstering
anti-nuclear opposition by baking unassailable barriers into the
legal system. That still meant you had to understand something
about science, but again without having to think too hard about it,
assuming that most people would give up before taking on formidable
legal barriers.
Many people who graduated with degrees in science, technology,
engineering and math (STEM) had learned at least elements of how
to think about science. This still isn’t included in textbooks,
but physicist Richard Feynman felt that it was important enough to
make it the keynote of his 1974 CalTech Commencement Address. This
address was captured in Feynman’s popular science nonfiction book
“The Pleasure Of Finding Things Out”.
In Feynman’s CalTech Commencement Address, he wrote that the most
important thing to learn about science was how not to fool yourself,
and not fool other people either. To do science well, you need to
tell the other people all of the related things that you think you
know about, including things that might contradict the thing you’re
trying to say, and to conduct careful experiments that might
demonstrate the contradiction. If what you’re trying to do is prove
something that might make you famous, or build your public relations,
or earn more money, it might be tempting to ignore other things
that might lead to a contradiction. That would be a mistake, and
once you do that, you’re no longer doing science. You’re doing
Cargo Cult Science.
Fast forward to 2022. It is increasingly difficult to ignore the
role of atmospheric carbon emissions in causing global climate
change, so people and organizations who previously benefited from
ignoring climate change or ignoring other things that might contradict
what made them famous, are having to face looming realities of
Nature. The formidable barriers that lawyers and legislatures baked
into the legal system are making this more difficult. Lumping all
things nuclear into the same category as civiilization-ending nuclear
weapons does not help, even as conventional 20th century nuclear
reactor designs are being replaced by less accident-prone designs
based on better-understood chemistry and physics and protected with
safeguards against misusing the reactors and fuel for production
of weapons.
I think that people could start making this right by first understanding
how nuclear reactors work, and that the controlled energy produced
by modern accident-resistant and properly safeguarded reactors is
different from the explosive energy and radioactive contamination
released in nuclear weapons detonations.
Once people understand how controlled nuclear energy works, they
could start thinking of renewable and controlled nuclear energies
less as rivals in a zero-sum funding competition, and more as
partners in a crucial zero-carbon collaboration in which both
energies benefit from working together. One example of this
collaboration would be to allow new safer and more fuel-efficient
nuclear reactor designs to enter the field, thus compensating for
variations in intermittent renewable energy sources. Another example
of this collaboration would be for nuclear energy companies to
unbundle new energy storage technologies as licensable services,
such as molten-salt thermal energy buffering to improve reliabililty
of renewables.
[Aside: at least one MSR startup, Seaborg Technologies of Denmark,
is already planning to do this with their molten hydroxide moderator
technology. URL: https://www.seaborg.com/press-release-hyme ; end
Aside]
But why should energy companies spend effort and resources to benefit
their rivals?
As Rod points out in this posting, there is an economic key to
enabling more collaborative energy investments, and that is to phase
out overly restrictive energy credits (e.g., “Renewable-only energy
credits”) in favor of a fair system of zero-carbon energy credits
that enables utilities to more closely follow fluctuations of energy
demand without penalizing consumers for the utilities’ reliance on
hydrocarbon-fueled backup power sources. That would require some
agreement by proponents of both kinds of energies, and some admission
of culpability on the part of utilities.
Great, nuclear joins the green washing crowd.
Unless we have nuclear near its should-cost as we did in the 1960’s,
nuclear power will, continue to be a failure.
Unless nuclear is below the long run cost of coal,
it will be too expensive for the developing world.
Only if nuclear’s electricity is less than 3 cents/kWh,
do we have shot at H2 that is competitive with gas.
Only if nuclear’s electricity is less than 2 cents per kWh,
do we have a shot at H2 based synfuels.
If nuclear is near its should-cost,
wind and solar will be relegated to unimportant niche markets.
I say this as a long time sailor,
who helped install one of the largest residential PV systems,
long before they were popular.
“Fast forward to 2022. It is increasingly difficult to ignore the role of atmospheric carbon emissions in causing global climate change, so people and organizations who previously benefited from ignoring climate change or ignoring other things that might contradict
what made them famous, are having to face looming realities of Nature.”
Please direct me to the examples of climate change that I should find it difficult to ignore. Perhaps that hurricane that just tore through the FL everglades, which had to be drained to build/farm is an example?
“One example of this collaboration would be to allow new safer and more fuel-efficient nuclear reactor designs to enter the field, thus compensating for variations in intermittent renewable energy sources.”
Please explain why you highlight fuel efficiency as a priority, considering that many of the Gen3+ and Gen4 concepts (such as NuScale, and anything with a HALEU pebble bed) do not use less fuel. Using ratio of discharge exposure noted in the Design Certification, NuScale uses 143% more fuel/MW than the existing LWR fleet. Pebble bed fuel with10-20% enrichment discards 20 to 40 tons of depleted uranium for every ton utilized. The liquid fuel and liquid metal cooled designs, arguably Gen1 and Gen3+ respectively, if designed to breed, could indeed make fissile material at a cost well beyond what it costs to enrich feed… a solution looking for a problem (while making new problems).
“at least one MSR startup, Seaborg Technologies of Denmark, is already planning to do this with their molten hydroxide moderator technology.”
Simply brilliant! Why not use half reacted alkali metal? Brilliant. Oh, wait. Because it is lye, which turns our bodies into soap and is incredibly corrosive. Next idea.
In my previous comment, “drum up popular support for anything”
should be “drum up popular support for opposing anything”.
Dunno chris, it’s a slippery slope.
Are yolu sure “fair markets” are really what we want? Those proposed medium-temperature fission + thermal storage systems typically buffer for only about 12 hours, enough to even the diurnal demand much like The Helms Pumped Storage system used in conjunction with California’s Diablo Canyon Nuclear Power Plant: https://web.archive.org/web/20120102061650/http://www.nwcouncil.org/energy/Wind/meetings/2008/10/ManhoYeung.pdf — see graph page 6.
Twelve hours peaking demand is hardly the same as trying to buffer a week, say, of relatively calm cloudy weather, and one is left with value of marginal thermal displacement. There it’s one thing to ask intermittant renewables to justify their existence on their value of displacement (marginal cost + social cost of carbon) of fossil generation. It’s quite another to ask of them the same for the (marginal cost + social cost of carbon) of fission generation.
Are you certain these renewables advocates are up for that level of physical and economic understanding? The alternative is to find productive uses for intermittant power. Sort of like storage, but electricity-powered processes whose capital cost is low enough to justify intermittant operation. Things like water pumping, desalinization, or CCS — if any such were low enough cost. Intermittant renewables are great where we can afford them. But how much demand shifting can society tolerate?
I like this collaboration idea. I think that nuclear power will really get strong political allies when it begins to produce process heat for industry. The Midland project I worked on many years ago was going to do that. Sadly, it morphed into a gas plant.
Nuclear power has limited political clout. However the political clout will increase at least 10 fold when major industries are directly reliant upon it rather than natural gas.