(A technical version of this paper, with four detailed appendices, is also available.)
An increasing number of national, state and local government leaders recognize that rapidly decarbonizing the electricity grid is necessary to slow the disruptive effects of a changing climate. At the same time, our lives and livelihoods have never been more dependent on reliable and affordable electricity. The challenge for utilities and regulators lies in how to simultaneously fuel economic growth with increased electricity supply while ensuring the electricity is clean and resilient.
Renewable portfolio standards, carbon reduction goals and green power tariffs, among other policy and regulatory tools deployed in recent years, have slowed the aggregate growth of carbon emissions. Public sector and business leaders are now focused on solving three more specific challenges:
- Decarbonizing high-emissions hours, seasons and places.
- Building local and national competitive advantage by expanding the hourly availability of clean, resilient electricity supply.
- Growing carbon-free electricity supply that can offer energy and reliability services at times when fossil-fueled resources are currently depended upon.
Meeting these challenges will require new targeted policies to drive resource investments, infrastructure investments and operating practice improvements.
A 24/7 carbon-free electricity transition tariff is a tool to accelerate decarbonization generally while addressing times and places on the grid where emissions have been most difficult to reduce.
24/7 transition tariffs are different from the green tariffs that match annual consumption with annual renewable energy production. 24/7 transition tariffs seek to match a customer’s hourly consumption with deliverable carbon-free electricity provision in each hour of the year. We refer to this concept as a “transition” tariff because the transition to 24/7 carbon-free electricity will happen over time, with successive tariffs progressing farther toward the goal.
The opportunity to standardize tariffs to accelerate offerings and adoption in many more places led the Regulatory Assistance Project to initiate the project described in this paper. It was a comprehensive initiative to define the optimal design of 24/7 transition tariffs and contracts for participants and broader electricity systems. Throughout 2023, RAP worked with a group of stakeholders — and special advisors Janet Gail Besser and Ted Thomas — to develop guidance on how green tariff programs may evolve to best meet the needs of today’s grid.
The effort yielded a set of five fundamentals intended to help regulators, utilities and customers develop 24/7 transition tariff offerings that can accelerate decarbonization while advancing the public interest.
The fundamentals are:
- Integrate transition tariff investments with ongoing utility planning.
- Ensure accurate hourly emissions tracking and verification.
- Design transition tariffs to accelerate complementary investments.
- Employ rate design to ensure fairness and to align carbon-free electricity grid needs with pricing and compensation.
- Integrate operating systems to implement hourly matching.
This summary paper outlines the five fundamentals and offers recommendations for implementing them.
(Feature/cover photo: Laurence Dutton/iStock)
