The problem with energy certificates with Killian Daly (EnergyTag)

Welcome back to transmission. I'm Joe, and today I'm sitting down with Killian Daly, executive director at Energy Tag.

Under current carbon accounting rules, companies can legitimately claim their solar powered at three AM.

Killian walks us through how this happens, why it matters for the energy transition, and how upcoming reform to the GHG protocol could unlock investment in the storage that's needed for true decarbonization. Want the latest news, analysis, and price indices from power markets around the globe? Subscribe to our email newsletter, The Weekly Dispatch. Now let's jump in.

Hello, Killion, and welcome to Transmission.

Hi. How's it going? And thanks for having me on.

And as always, if you'd like to start by introducing yourself, introducing Energy Tag, and tell us about your role within the energy markets.

Sure. So I'm Kilian Daly. I'm executive director at Energy Tag. Energy Tag is a nonprofit organization, really working on trying to reform, electricity market structures, renewable electricity procurement, carbon accounting so that ultimately we're driving really towards clean power around the clock. That's our goal, and we have teams here in Europe, but also in the US, and now growing as well in Asia Pacific.

Great. And you've got some experience of renewable energy procurement right there at the core phase. Right? So historically working for big corporates, maybe seeing some of the problems with the current system, and that's kind of what drove your kind of desire to fix some of those problems.

Yeah. Yeah. So I've always kind of been in energy to to to one to one extent. So I, yeah, studied energy and electrical engineering.

And then after that, I I worked in in France. So I was working in Paris for a French company called Air Liquide, which means liquid air. And, actually, that that takes a whole pile of electricity, so that company actually consumes more electricity than than Ireland where where I'm from. So it's a very electro intensive company.

What I used to do there is basically oversee the global electricity portfolio and the hedging of that. So really managing electricity prices across global electricity markets, working on power purchase agreements, so, like, how do we procure renewable energy. And then I would kind of pop over, I suppose, for a few weeks a year and do the carbon accounting. So, like, what's the emissions of the electricity we're consuming and kinda saw firsthand some of the issues, glaring issues with with how we do that today.

Right? Suffice to say the, you know, electricity markets and how you think about buying electricity on electricity markets in in the real world is is very, very different to how green electricity is claimed and bought today.

Yeah. And maybe let's kind of jump right in at the kind of deep end of that. Right? And I know I've seen you quoted before as saying that under the current system, under those carbon accounting regulations that exist today, a company can claim to be solar powered all night long, right? So maybe if you could just kind of start there and talk us through how that's possible and why that's a problem as we move towards net zero.

So, yeah, that's possible because that is, you know, that's the kind of the rules of the game as they're written right now. So there's this thing called the greenhouse gas protocol. That's the global standard used by ninety five percent of companies to do their carbon accounting, and that basically permits what we call annual matching. So you can cons claim to consume green energy or clean electricity produced at any time of year.

So, yes, you can claim to be solar powered at three o'clock in the morning when there's no sun in the sky. Right? So that's that annual matching issue. There's another issue around how what we call, like, geographical matching or deliverability.

So, like, Europe, for example, is treated as one zone. So my parents in Ireland, could buy electricity and that could be supplied to them, from Norway, and there could be a hundred percent renewable claim or or a data center in Ireland, right, can buy certificates from Spain and be a hundred percent renewable in Ireland even though, obviously, you can't call up a power supplier in in Spain and ask for electricity to be delivered to Ireland tomorrow. That would, raise a few questions, let's say. So we have this disconnect that, in my view, has to be solved.

No. It makes sense. And I think you can see some particularly egregious examples there. Right? Particularly when it comes to, I mean, theoretically, the network could flow power from Norway to Ireland maybe.

But when you come to like Iceland, right, and if you're buying kind of these certificates from geothermal generation in Iceland, and it literally has no physical way of getting to Yeah.

So, like, know, Iceland, well, you know, Iceland is today a major exporter of renewable electricity, but can't export electricity. Yeah. Right? So, that, yeah, there you go in a nutshell. One one point that I I would say, you know, theoretically, okay, Ireland and and and Norway are connected to a a synchronous grid, but we do know how much electricity Norway can export.

Of course. Yeah.

So we can export about twenty terawatt hours a year. Norway exports about a hundred to a hundred and twenty terawatt hours of green certificates. So five five, six, seven times more green energy leaves Norway than, you know, than physical electricity can. So that is also not really credible.

No. No. It makes sense. Right? Quite kind of thin connections and not really aligned with the physical reality of the grid.

Yeah. And I think maybe before we kind of dive into a lot of the specifics here, right, get into our acronym soup, EACs, RECs, REGOs, it's probably useful to outline this with an example. Right? I think an example that comes up fairly regularly when we think about this, some of the big consumers of electricity are the big tech companies.

Right? If, let's say, Microsoft have a Virginia data center. Right? They kind of on one side of things, they are keen to spin that up twenty four seven, have that cranking out their latest LLM model.

On the other hand, they have a lot of this pressure that they've made these big punchy sustainability commitments. Right? So under the current system of carbon accounting, how would they kind of at that level match their emissions and how does that kind of current system work for them?

So, yeah, like, obviously, let know, credit where credit is due. Yeah. The big tech companies are the biggest buyers of renewable energy through power purchase agreements largely, but not not always. There's also some, you know, some some, let's say, less less credible methods of procuring, but they're also all one hundred percent renewable for many years already.

And so there's a disconnect there. Right? We we know being a hundred percent renewable is is really hard. That is a a big task.

But yet a lot of the big companies are already and have been for years, and that is because they are using these accounting standards to make that claim. So they're not inventing their own rules.

These these are the rules, and they're they're following those rules to, you know, heavily procure solar in places like Texas

And then use that to say, my data center in Virginia is a hundred percent renewable. And so it's been good, I would say, you know, that they are buying renewables, that they're going out and doing that, but it's not the same thing as being job done. And and that's where I I kinda have an issue, and I think that these standards need reform is because ultimately, right, if that data center really wants to be a hundred percent done, I think they have to think about, well, how are they consuming? What demand response, flexibility, storage, matching local renewables to that demand where, you know, in the same balancing authority or area.

That's a much harder challenge, and that's the challenge that they really need to be tackling and and getting through in my view.

Yeah. No. So it kind of it seems like I think it's fair to say in all of that, right, the the current system might not be fit for purpose to be kind of generous there.

So when we look at that, I think the kind of first question that comes up right is how did those standards get set in the first place? Right? How has it come to be the case that there's such a big disconnect maybe between some of these physical realities we see that kind of solar in Texas not being able to flow to a Virginia data center and but it's still being claimed as part of the kind of grid mix for that data center. How were those standards decided in the first place and kind of who whose idea was that?

Right? Yeah. Well, I think, you know, if you're looking back twenty twenty, even thirty years at this point, there was kind of the initiation of green electricity markets. So people were like, hey.

We wanna buy green energy. We wanna differentiate our our procurement. So you got green electricity market start in in Europe and and the US, twenty, thirty years ago. So that was the very beginning.

Right? And I think at the beginning, it was just like, okay. Let's keep it simple. Let's just get these green certificates, trade them around.

I think, like, the Netherlands and and GB were some of the earliest places where this started.

And then, obviously, those markets started to grow and and go across different European countries. And then eventually, I suppose the first, like, let's say, main landmark standard on carbon accounting and and green claims was the greenhouse gas protocol. So that was first published in two thousand and one. They had the scope two or electricity guidance, which came out ten years ago in twenty fifteen, and that kind of really embedded these rules that we've been talking about as as the norm.

Right? Like, so it was kind of an organic process, I suppose, like a like a lot of things. Things kinda start in their own corner and eventually get standardized. And now, well, we're in a different era now.

Right? Back fifteen years ago or ten years ago, renewables were still, you know, a minor part of electricity mixes around the world. That's not the case today. In in a lot of grids, they're already being curtailed.

There's a lot of negative pricing. There's a different set of challenges that we have, you know, post twenty thirty to back in the twenty tens.

Yeah. No. I think that makes sense. Right? And we've kind of the the system has completely shifted even over these relatively short time scales.

Right? So Yeah. Even if we look back now in twenty twenty five, we look back ten years, right, to the scope two guidance coming out. If, you know, the the GB market is the one that I probably know best, right?

But even in twenty fifteen, you still had a lot of coal on the system, a lot of gas. Renewables were kind of just starting in earnest. So a big part of this was just really trying to spur any and all renewable generation onto the system. Right?

So if if companies could, you know, pay slightly more for their energy just to get a bit of renewables, spur anything that made sense at that time.

Yeah.

When we look at the system today, Europe has made pretty good progress across the board. Right? We turned off coal completely in GB last year. We've done pretty big rollout of renewables generally.

But now it's kind of the big challenge as we move forward is in integrating these renewables on the system, right? We have, if you look at Germany or somewhere, I kind of always pick on Germany here, but they have a load of a load of solar generation in the middle of the day, right? A load of negative prices. Nobody can use it.

Yeah. So part of the challenge now is redesigning the system that we have to deal with some of those realities. Right? So maybe just to kind of follow on from that.

So that's that's where we've come from. When we look at where we're going to, could you just talk us through maybe some of how you align those accounting standards with those physical realities on the grids? And if I can ask quite an open question maybe, is there ever such a thing as a green electron Yeah. In this accounting system?

Well, not to, you know, stick the booting on Germany, but I think it is just a just a good example of the paradigm shift that we have. Right? Like, we it was, you know, the last ten years was or or fifteen years was, let's get gigawatts of renewables on the grid. Yeah.

And now we have to deliver them. Now we have to integrate them, and that is a different challenge, and it takes a different set of tools and a different set of measures. Right? And I think, you know, one one example I I kinda point to in Germany is because there's just too much solar now in the middle of the day and there hasn't been enough thinking around flexibility, I would I would say.

Yeah.

Two power purchase agreements were signed in Germany in q two this year. Volumes down ninety percent. So, like, that's just an indicator of the market saying, okay.

What's what's next? We need a new product here because what you're selling us right now Yeah. We're not seeing the value in that anymore. So that shift to hybridization and flexibility, I think, is is being asked for for many for many corners.

In terms of, like, how do we improve things? I think the most simple mental model is is just to kinda look at the power market. Like, how does that work? Right?

That works in the European context with, you know, what we had previously was sixty minute minute day ahead settlement periods. Now we've moved to fifteen minutes just last week or or whatever it was.

So, yeah, we have now what is it? Thirty five thousand plus, you know, blocks in the year where power is traded and electricity is traded. The green electricity market still has one. So, you know, what what's going on there? We we need to tighten that down to ultimately incentivize the flexibility that's needed. And the other thing, you know, is to move from these vast geographic boundaries back down to things like bidding zones. So, basically, if I can, you know, bilaterally contract that power physically and get that delivered to me as I can in in electricity markets, then that's a credible enough way of doing a green claim as well.

If I cannot, then we should start to ask questions. If you can't call a power supplier and ask for that power delivered to you, then should you be making the claim of its green attributes? I I don't think so, and I think that's a that's a kind of a maybe a mental model to keep in mind. Right?

Yeah. Is there a true there's obviously green electrons produced. The way the grid works is is complicated. So once, you know, you can't individually track electrons from point a to point b, but I think we can come up with pretty credible mechanisms.

And again, I go back to the power markets. I can go and bilaterally negotiate for the power to be delivered to me into my balancing responsible party and and have that like, contractually delivered to me. And then we talk about physical delivery of power and electricity markets and trading.

So for me, that's that's also a good enough basis to say, yeah. I can make that claim of the green electron provided I'm following these basic rules. What I can't do to go back is to, you know, claim to consume Spanish solar, produced six months ago in in Germany. Right? Like, that that's something that we definitely can't really find a credible story for.

Quick break. If you listen to this show, then you probably work in energy. And at Modo Energy, we're not just talking about the energy transition. We help our users to actually make it happen.

All energy storage, solar, and wind assets on the global balance sheet need to be valued and benchmarked, and that's where Modo Energy comes in. Our benchmarks and forecasts are transparent, bankable, and trusted by the world's leading banks, asset managers, utilities, and developers. So if you want to learn more, go to modo energy dot com. And if you want more content like this, sign up to our weekly dispatch newsletter.

Enjoy the conversation.

To dive into the kind of detail of that and yeah, to kind of look at. So that's the the fundamental case there. Right? We can't really necessarily track electrons through power grids. We have to approximate some of that, right, in any kind of market generally is just trying to approximate some of those physical realities on the grid, right, as we move towards this certification doing the same.

Yeah. It'd be interesting to just hear how we adapt. So currently, on the system, right, for tracking renewable energy, we have they're called something different in every different region, right, but energy attribute certificates, EACs, the RECs, REGOs, GOES, however, you know, whichever one you prefer.

But, yeah, just to to kind of talk through, so you mentioned bidding zones, hourly matching. If you could just kind of talk generally through the system that you would use to approximate a green electron in this example using the certificates. Right? And how would that work in a future system?

So, basically, if, you know, if you are to have an allocation system, basically, between a supplier and a consumer for a green attribute, you do need because you don't have a physical traceability of the electron, you need an accounting system to do that. So today, we use guarantees of origin in Europe or EACs, RECs, they're called around the world, REGOs in the UK, to do that. And what that type of system does well today is make sure that one unit of green energy is only ever claimed and counted once. Because if you start counting it three times, then your whole markets immediately it has no credibility.

Right? Like, you're you have double triple counting, and it doesn't work. So it does that well today. What it doesn't do very well is, you know, those certificates often flow across borders when, you know, I've been through the numbers when when they can't or or or that's physically impossible, and they tend not to have temporal information on them.

So, ultimately, what we need is to have a a time stamp on on those certificates. So that's actually something that we work on at EnergyDag. We have, an open source set of standards on that.

We have open source code about how to implement those systems as well. But there are workarounds that, like, we're already using today. So you can take a monthly certificate and just layer on the, you know, metering data from the wind turbine, for example, and make an hourly claim. So various companies are already doing that around around the world today.

You can check out our website. There's lots of different case studies on that. So, yeah, again, we're just using the data that is there already from settlement, right, of of power on on on supply and and demand side. And and that's basically how we would create this approximation of a of a green electron traceability mechanism or market.

Yeah. No. That that makes sense. And I think just doing some kind of back of the envelope calculations right while you talk through that example, I think There is potentially potential for the complexity of this to increase quite substantially.

Right? So, yeah, eight thousand and odd hours in a year. Right? If you move from annual matching through to hourly matching Yes.

Is it safe to say that that increases the complexity of your carbon accounting exercise eight thousand times?

Do these companies have enough kind of resource to, you know, does does it come down to the level of I need to or somebody needs to track the hourly generation of every power plant in Europe, how all of that power is flowing and I need to then cross reference that to my operations or I'm hoping you're gonna tell me that there is data stack tech platforms in here that can manage all of that complexity for people. Right?

Yeah. Like, listen, it's obviously definitely not eight thousand times more complicated.

To an extent, if you have a proper tool, it could be just just as easy. You might not even have to do the job. Right? So as I mentioned, there's, you know, there's tools out there.

There's, you know, companies like Flexidao, Granular Energy, Renewables. There's lots of different companies out there who can automate this stuff and make it very simple, ingest the data, and ultimately manage datasets that are not very large when when, you know, we take a step back. I know if we compare it to what we have today, which is incredibly rudimentary, then yeah. Okay.

It might seem like how how could we ever do this? But, again, we're trading power at at, you know, thirty five thousand times the frequency. So there's that, and then there's obviously things like ancillary service markets and and electricity markets that are obviously much more high higher frequency than that. We actually did a back of the envelope calculation a few years ago.

So to to track all of Europe's electricity, all whatever, four thousand terawatt hours hourly, that would take about the same amount of data as is, you know, generated and tracked about four or five, like, autonomous cars. Right? So that's the order of magnitude we're talking about. We're not in a massive big data sphere here.

This is pretty simple data, compared to a lot of other things we're doing in in the world today. So I think the juice is absolutely worth the squeeze here. Right? Like, it's going to be a change, but it's absolutely nothing novel compared to what we can already do today in electricity markets and in other in other applications.

Yeah. No. That that makes sense. Right? So it is kind of the increasing complexity is more a product of how incredibly non granular the current signals are as opposed to kind of how granular they should be right.

Hourly matching, not too much to ask for. Can definitely appreciate some of those points. Right? We here at Moto, we're a kind of energy tech platform.

You see these vast data sets. Right? It is still possible. I mean, particularly now that we have things like AI and a lot of what these data centers are actually doing.

Right? Kind of enabling that.

So yeah. Kind of should be relatively, I wouldn't say straightforward, but the the tech exists. Right?

It's not an intractable problem there to solve some of And again, like, you know, going back to to my previous life, we were just incredibly used to thinking in, you know, buying from wholesale electricity markets, having hourly day ahead prices.

That that is just how the electricity system works. It's all about time, electricity. Yeah. It is all about time. And so if you just ignore time, you're obviously not going to have an appropriate system for optimizing or driving impact. You just cannot get around that.

And so, yeah, that's that's why we need to kinda make things more accurate. I would say, and we'll probably get to that a bit later, I don't think that, you know, every company should move to this straight away. A small number of companies consume the vast amount of electricity in the world, public data from a thing called CDP. You're basically talking, like, seven to ten percent of companies consume about seventy five to eighty percent of electricity.

So with a pretty small subset of companies, you're capturing the vast majority of electricity consumption. They tend to obviously be better resource companies who have the a bit more time to go into this level of accuracy. You know, I'm I'm not an advocate for, like, having SMEs necessarily move move to this before, you know, Microsoft or Google or Amazon. Right?

And maybe maybe just to pick up on that point in a bit more detail.

So you definitely see that, right? I mean, I think we can appreciate a lot of the industrials like Air Liquide, for example. They are massive consumers of power. And I think we've obviously kind of picked up on the the theme of big tech and the data centers here as a big driver of this demand.

I think just to to kind of pick up on that and what what might happen there to maybe play devil's advocate for a second. Right? So you see commitments like, I think, OpenAI a few weeks ago said that by the twenty thirties, they want to be consuming they have they're sprinting fully ahead at deploying kind of compute capacity and massively increasing their power consumption. I think when when we look at this, we've kind of done a bit of analysis here at Modo.

Right? Particularly these data centers in places like Virginia in the US. You see there that in order to even connect to the grid in the first place, they are bringing along their own gas generation with them. Right?

So they're kind of fully gas powered in a lot of cases. General Electric can't sell can't make turbines quick enough to provide them. So, you know, that if we were looking at a super pessimistic view of this, right, it is it could it be the case that if we increase the complexity of the carbon accounting here, right, these companies might say subtly give up on some of these net zero commitments they've made in favor of pursuing these AI gains. Or in your view, could it be the case that this forces a bit of a kind of pragmatic reset on this.

Right? They accept that they are, say, fifty percent renewable rather than a hundred percent, and they start to push down their emissions, which are real emissions over time. I just wondered, yeah, in terms of if they are a big consumer of that power, how do you think an accounting change would impact them, and can it drive reductions in these kind of, yeah, big carbon Yeah.

Yeah.

It's it's definitely a big question, and it is like a real it's a real thing, especially in the US, this demand growth from from data centers. You know, a hundred percent of something that's pretty flawed, I think, is is never a good basis for adjudicating or evaluating how their decarbonization you know, that the the decarbonization of those data centers is going. Right?

Yeah.

If you build in Virginia, you sign a load of Texas Solar and your job done.

Okay. Do we do we really wanna be pushing for that? Because they're not gonna, you know, tackle their their issues in in Virginia. Right?

So I think we we have to have a system that says, if you guys wanna make this hundred percent claim, then you need to kind of get through all of the hoops. Right? You need to source the renewables locally. You need to, think about flexibility and storage.

And, yes, maybe we need to accept that moving away from a hundred percent renewable is the only possible acceptable claim. I think I think we need to have a reset on that because it has led to a really fudged accounting system and claims that just have sometimes no link to reality. So I I think there's a there's a bit of both there, but yeah. I I I really, think probably those examples are really clarifying and good examples of to why we need these changes because they're all a hundred percent renewable still today. Right? I know of data centers in the US that are powered by gas, but actually saying still that they are a hundred percent clean because they bought, you know, x amount of certificates from somewhere else in the US.

Yeah. So, you know, what what are what are we really doing? Right? If if if that's the basis for conversation for the next twenty years, well, we're just gonna build a lot more gas and and think it's clean.

No. No. That that makes sense. Right? And it's kind of the case that if it's it's happening anyway, right? Like where, yeah, kind of that that is the the tide of change over there, right, in terms of the AI workloads.

And if it's happening, the accounting should just reflect what's happening. Right? There should be no bias in that accounting. It should be a realistic view of what's actually happening on the system there, which we can then take a look at and say, right. We know with better certainty that Amazon or Microsoft's emissions are x. Yeah. And then they can be kind of held to account in terms of how they then deal with those emissions.

And I think there's there's actually a really important point that we sometimes don't think about that is shown in, you know, many, studies on this from the IEA, from Transition Zeroes, which is a nonprofit here in London, showing that if you're incentivized to cover your demand around the clock with clean power or, you know, nearly around the clock, let's say, you're thinking of demand flex, you're bringing storage onto the system, that leads to much less electricity price inflation where you're at. Right?

And that's a big issue at the moment in the US, particularly in PJM

The biggest interconnect there. Prices of electricity are rising significantly. Data center load is rising significantly. And so we need to think about how are they being served their power.

Are they, you know, committing to a bit of demand response? Are they committing to building more storage? Because ultimately, that is going to help manage electricity price inflation, which is probably political topic number one, two, and three when we think of the energy sector in the US at the moment. Unfortunately, the climate conversation there is really complicated. We have teams in the US, but prices is everything. It always has been in in America, I suppose, and it always will be. And I think the argument for moving to, you know, better incentive structures, is very strong in terms of manage managing electricity price inflation.

Yeah. No. That makes sense. Money talks and all of these things. Right? And if people see their energy bills doubling Yeah.

Then, yeah, it might be all well and good that that kind of AI is Yeah. Kind of leading to economic progress. Right? But if you see your bills increasing as a result of that, then you probably wanna see some rebalancing.

One hundred percent.

I and I think that kind of leads on nicely to something that we think about here a lot, right, which is the the storage piece. Yeah. It sounds to me and probably I would say this right that the missing piece in the system here, we move to this real time hourly matching, then there needs to be a physical bridge between kind of generation and consumption, right, that comes in the form of storage and flexibility.

So could you just talk us through how maybe moving to a system of real time hourly procurement would say help the business case for storage? Yeah. And if that would spur more development of these technologies that we need to match supply and demand more equally. Right?

To put it just very simply, if you can claim to be solar powered at night, well, why would you build a battery to actually be solar powered at night? Yeah. Like, that that's number one. Right?

That's just a basic logical rule. And so that's the fundamental thing to understand. Right? If if you have to be, you know, clean on an hourly basis, well, when the sun goes down and there's not a lot of wind, yes, if you have a battery and you've stored that energy for a few hours, absolutely, you can still be clean.

If you don't, then, well, then you're a bit stuck. Right? You maybe do demand response or whatever, but it's going to create a very clear price signal for firming and flexibility technologies that is not there today.

So, I think one European country issues certificates for storage. There is basically zero money flowing from renewable energy markets today into storage assets. And that is a that's, you know, that's kinda criminal. Right?

Like, we need much more flexibility in storage, and these markets are not addressing that problem today. I think it's one or two percent maybe of of PPAs. There was some Wood Mackenzie numbers on that in Europe contain storage. So, yes, we need an urgent reset, and it will obviously benefit these technologies that ultimately can shift clean power from times of abundance to times of of scarcity.

And, yeah, there's obviously Every Every study that has been done on this, there's been a lot of modeling done on this question. So Princeton, TU Berlin, you know, IEA, they've they've all modeled this stuff. AFRI have done some work for Neso here in the UK, all showing this is this is a good move. This move to hourly accounting is a good thing for storage very clearly because it really brings out it brings out its its value.

So, yeah, I think I think it's it's very, very important to get that in mind that there's a fundamental blocker there today and it could be unlocked with some of the changes we're about to discuss.

No. We definitely appreciate that. Right? Any kind of extra market that we can make for storage just then tips the balance in favor of building that out. Right? When you're looking at an investment case, if you can get an extra ten, twenty percent on your merchant revenue stack, right, then it boosts your revenues and you are just generally more likely to invest in that technology versus anywhere else that you could put your capital. Right?

Yeah. And I think one area that's kind of going back to I I think one area of where that's really exciting for me is, when you look at long term contracts like PPAs. So, like, obviously, long term contracts are great for derisking capital investments, especially as things like ancillary sir service markets, like, kinda soak up day ahead arbitrage is is lucrative, but will it be in the future? That that may happen, but that may tighten up as well.

So probably the need to have long term contracts for sure on on for buyers, that's always good for hedging your costs. Today's PPAs are are not really providing that hedge right now. There's a lot of cannibalization electricity markets. You're kinda getting stun stung, let's say, when the sun goes down and you have a solar PPA.

So I think storage can have a really important role as well in these long term markets in in, you know, making the hedging value of of power purchase agreements more crisp and clear and more relevant.

Yeah. Definitely. Right? So you move to kind of more of a firm power style PPA, derisk a load of stuff. Yes. The the banks love it.

Everybody's involved and kind of Kind of everyone.

That's as well. That's kind of another maybe we can talk about that some other time, but that's something that we're working a lot, in the moment is really trying to rethink how we support renewables, like, you know, in things like government auctions. Like, how do we really actually think about let's now prime this hybrid renewable market where we're not just thinking about building solar. We're thinking about building solar plus batteries plus storage to have a much firmer green profile.

That makes sense. Yeah. And maybe just allow me one kind of one final question on storage before we come on to the kind of implementation and next steps here. How does this work logistically in terms of storage?

Right? So if I have, let's say, just a kind of standalone grid scale battery on the system. Am I kind of arbitraging between these certificates, these hourly certificates? Do I kind of store these?

What's some of the the kind of data flow there? Yeah. How how would I actually earn this revenue?

That's actually something we've been working on for for quite a quite quite a while with Energy Tag, and we're working on at the moment actually as well. We so we have a kind of a methodology for for doing this.

Essentially, what what you do is when when your battery is charging, let's say during the daytime, you act as a consumer, and so you can charge in solar power with your hourly tracking, and then you have that in the battery in, like, a reservoir of green attributes. You account for losses, and then, you know, in the evening time when the sun goes down, you discharge them. So that's the basic methodology. You know, I won't get into all the all the details, but that essentially is how you would do it and create that arbitrage opportunity.

Again, kinda similar to, you know, how you'd be thinking about it on on the power market. We actually have worked with, Quinn Brook infrastructure partners, so, they've demonstrated this methodology. There's a white paper online if you wanna check that out. It's on on our website as well.

We're we basically, we have a case study section, so there's, like, forty or fifty different examples of this hourly tracking and matching being done, including storage examples. So go there and you can see how how that was put together, on storage. And and, again, this is something that urgently needs to be integrated into renewable energy markets because it's not there today.

Yeah. I think the the kind of more I hear here, right, the more it seems like this kind of accounting system and an update to it does just match what is happening in the power market. Right?

So it's almost like trying to mirror I think it's a good proxy.

Yeah. Because the power market, what what it doesn't have is is some type of traceability. Right? Like, you don't it's just all colorless and and gray. Right? So what we're trying to do here is add on some color to the power market with the system that actually respects the norms and rules of the power market. So that that's that's a really kinda good frame of reference than what I always use.

Yeah. So so far, this all sounds sensible to me at least. Right? Yeah. I think it'd be good to get your perspective.

So you're there in the room working on updating these accounting standards. Right? You have a load of different stakeholders involved in that process. It's kind of like a collaborative process as people decide what the future of those standards looks like.

Right? Yeah. I think it'd be interesting to get a bit of the the inside scoop from some of those discussions. Right?

Who's involved? Is are people trying to mark their own homework on these emissions? Right? And, yeah, what are some of the different dynamics at play? As much as you can tell us.

Yeah. Yeah. Yeah. No. Well, so, yeah, just maybe just so this greenhouse gas protocol that I mentioned earlier is kind of the the rule book for for how these markets work. That is under review.

So for about a year now, there's been a technical working group process where they're updating these electricity or scope two guidelines. There's a technical working group. I'm a member of that, so that's made up of kind of forty or fifty now global experts coming from all walks of the energy sector, and beyond. So wide geographical scope.

It's not just companies. It's like a broader selection. So there's NGOs. There's academics. There's some people from governments as well involved.

Because, obviously, it is it's important to have companies. Right? Like, you have to have the practitioners in the room. But, yeah, you can't have a situation where people are not only marking their own homework, but writing their own homework as well.

That wouldn't be, yeah, that wouldn't be ideal. So, and I suppose also there's people like me who've kinda been in the companies, but now are are outside and can kinda maybe just give a a a kind of a clear eyed assessment of where things are at. So, yeah, like, listen, obviously, anyone who's followed this topic knows that it's it's a source of controversy to an extent. Not everyone agrees with the, you know, position I've put forward here of aligning closely with power markets.

There's other people who think that that is not necessary. They think that, you know, maybe that's going too fast or we should just have that optional and people can still report under today's frameworks. I think there's others who think, yeah. Let's let's go do that, but let's make sure the transition is is reasonable and smooth, and I completely agree with that.

No one should, you know, flip this overnight and and cause chaos. But, yeah, again, I think in terms of the evidence base for this stuff, in terms of just basic logic, in terms of the feasibility jump not being too much with the right phase ins, I kind of I'm sticking to my guns at it anyway. But, yeah, there's definitely a a very various views, I would say. There's a whole list on on their website.

Can see who's in the working groups as well. So but, yeah. It's it's not always easy conversation, but I suppose that's normal. Right?

No, I can imagine, right? And there has to be a healthy debate in any of these things, right? Yeah. Yeah.

I think, yeah, we've kind of definitely laid out a pretty clear position here, right? But what are the next steps in terms of how this gets decided? How these standards end up. And maybe, yeah, just a comment more generally on kind of why that standard matters so much, right?

So the it can can sometimes seem like you can be maybe in the weeds when you mention things like accounting standards. It tends to kind of turn people off. Right? But Yeah.

Why why is it so important that we update this standard generally? And, yeah, how could anybody listening to this, right, who might be wanna get their position across? How how do we shape these things?

Accounting is obviously, you know, a lot of people start to fall asleep when when they hear the word immediately. But, actually, accounting is incentives. Right? And and incentives matter.

Incentives are the basis of markets. I used to be involved, as I mentioned, one of the biggest electricity buyers in the world. And this standard matters a lot because it's the basis for, well, are we gonna make that like, are we gonna go and do that PPA? Are we gonna, you know, take the easier route and buy those, cheap certificates?

That's all based on the incentive structure laid out in this document. It's used by ninety seven percent now of, of the Fortune five hundred. It's embedded in regulations like the EU CSRD, so companies can't get around it. It's in it's in California regulations.

Companies reporting publicly using it consume more power than India. So this is not small fry.

But I would really encourage people to to kind of pay attention to it because it it matters a lot even if it is an accounting standard. And, you know, we we don't necessarily wanna think of accounting, when, you know, if we don't have to. But in this case, I really I really, really would because it's setting the incentive structure basically for green energy markets post twenty thirty. And so, yeah, if you wanna see more investment in something like storage, which I know your, you know, your listeners will, you need to care about this, because I I don't really know of that many standards or or, you know, regulations even that are applied so broadly.

They impact how thinking in China is happening or the US or or here in Europe. Right? So that's kind of rare, and it's a once in a decade opportunity. So I really think it's not to be underestimated, Joe.

Yeah. I think that's a really good point at the end of the day. Right? Like, we can look at regulations in individual countries.

We can, you know, we definitely focus on a lot of these GB UK specific regulations. Right? They might impact thirty gigawatts of demand. Right?

There not many standards have the ability to shape that across the world, right, across these massive grids, China, the US. Yeah. Yeah. So it can have a a massive impact, right, on how all of this works out.

For sure. And it also not to labor the point, but I I I think something that's we don't think about enough is that, you know, once companies have targets, they will then basically use their advocacy and lobbying power to open the path to making those targets achievable. And I think that's something that's very underestimated because, obviously, companies have a massive influence in how regulations are set. And so if you have companies thinking, yeah, we need to really unlock this storage thing because otherwise, I'm not gonna hit my target, I think that's only a good thing. Today, they they don't have that from their net zero targets. They just can ignore storage and flexibility. And and I I think that is underestimated, and I've seen positive examples of companies who who do now have these more, you know, precise and ambitious goals actually pushing for policy changes in in in a in the right direction as well.

Yeah. At the end of the day, they have a lot of power. Right? Even just from a kind of purchasing power perspective.

Right? They They can if their The consensus markets. Are aligned, they shape markets and they bring a lot of that kind of that extra storage and things online, right? So it's a good thing.

I think, yeah, kind of as we wrap up, I will give you an opportunity if there's anything that you want to plug. I know that we've kind of, yeah, touched at that at different points, but yeah, kind of anything that you'd like to Yeah.

So tell it is get into the depths of nerdiness here. But basically, this is the scope two update. And so energy type, we've launched a a campaign on this called scope true.

Very good. Yeah. Did you get it? You know? I was kinda cringe when I'm saying it, but I think it's a good one.

So, yeah, you know, we have website, Scope True dot org, so check that out. We have a mailing list. We have a load of resources. You can stay know, just stay in touch with this process.

I think that's a, you know, a really important one to to kinda check out because there's a public consultation on this next week. Right? And and what's gonna what it's gonna say is we're gonna propose that large companies move from annual to hourly accounting after a phase in, maybe twenty thirty. We're gonna tighten up these geographic boundaries, and that's gonna be a super good thing for flexibility and and storage.

So check out that website. It's gonna, you know, hopefully guide you along the path, through this public consultation that's open next week for sixty days, and it'll be awesome if people can get involved. We'll have guidebooks and all of that on on that website to to help people answer answer the public consultation and stay tuned into this process over the next year or two.

Yeah. Great. And I'll definitely be checking it out and I'm sure anybody who's who's still listening at this point will appreciate the the kind of detail there, right? And then I think a final one to to wrap us up in time on a tradition on transmission.

If you could give us your contrarian view in energy markets, right? So what's something that you believe that maybe the majority of other people in space or in the sector might disagree with?

Well, I think we need to focus on on on what we have and what's good in terms of delivering cheap, clean electricity around the clock. We have cheap solar. We have cheap wind in in many places, and we have battery prices just falling through the floor, as you know very well. And I think we need to have an ultra focus on that and getting to maybe ninety percent clean grids.

And then let's think about you know, or let's focus really on the other solutions, things like, you know, whatever it is, CCS, SMRs, technologies that are talked about a lot or or in the Feet a lot and are really important, but, you know, let's not forget what we have because there's a risk if we do forget that or if we denigrate renewables for just not being there enough of the time, then we revert to gas, and we open that pathway for reverting to gas waiting until we have SMRs commercialized. So I think we just need to focus on on the simple things and and and squeezing, you know, clean electricity out of as many hours as possible from from those kind of three technologies I've mentioned, wind, solar, storage.

I think they're gonna be the backbone of of the energy transition, and sometimes we we we forgot that.

Yeah. No. I like it right. And I think there's definitely a tendency that people like to, you know, love shiny new technologies. They might see something that's gonna come along as a panacea to all of this. We, you know, we're building out all these renewables, but, actually, actually we're going to get nuclear fusion, which solves all of this, right?

And I And I hope we do.

And please continue working on that. But like, just let's not forget what we need to do like right now in the next five years.

Yeah. No. That's definitely kind of a you got to risk weight some of that, right? And kind of work with the system you have.

And actually, some of the are boring, maybe logistical, but they need to be done. Yeah. And you have to roll it out. So yeah.

No. Good answer, I think.

And, yeah, on that note, Killion, it's been great to have you here today. Thanks for joining us on transmission.

Thanks so much for having me.