Green electricity, or simply green power, refers to electricity generated from renewable energy projects such as solar, wind, nuclear, hydro, and biomass energy. Because its generation process produces little or no harmful emissions to the environment and does not consume fossil fuels, green electricity is more beneficial for environmental protection and sustainable development compared to conventional thermal power.

Green power trading refers to long-term electricity transactions where green power projects are the subject matter, aimed at meeting the demand of electricity users to purchase and consume green power and providing corresponding green power consumption certification.

On September 7, 2021, China officially launched a pilot program for green power trading, marking the start of a new model for green power consumption in the country. Green power trading can guide society to actively consume green power, enhance the competitiveness of green power in the electricity market, reflect the environmental value of green power, accelerate the development and utilization of green energy and the clean and low-carbon development of the power industry, and achieve China's energy transition.

01 Why Do Enterprises Need Green Electricity?

Enterprises are the most important participants in social and economic activities. Their strategies for achieving carbon neutrality play a decisive role in advancing China's "Dual Carbon" targets.

In October 2021, the State Council released the Action Plan for Carbon Peak Before 2030, clearly proposing to guide enterprises to proactively adapt to the requirements of green and low-carbon development and implement key actions for carbon peaking.

Non-governmental organizations have also initiated platforms or projects related to green power procurement, such as the RE100 project, which commits to achieving 100% renewable electricity globally within the shortest possible time (no later than 2050) through cooperation with power generation companies, power-consuming enterprises, and other stakeholders. Some Chinese enterprises have joined RE100, including LONGi and Sungrow.

Facing the urgency of climate change and pressure from global climate movements, the 100% renewable energy project has become a standard practice in many international tech industries. Currently, about 41 tech companies worldwide have set long-term 100% renewable energy targets, with approximately 20% already achieving their goals, and another 50% expected to do so by 2030. In 2019, over 44% had a renewable energy utilization rate exceeding 60%.

Moreover, the transportation sector accounts for a significant portion of global greenhouse gas (GHG) emissions associated with energy. In 2019, energy consumption in the transportation sector was approximately 449 million tons of coal equivalent, accounting for 9.24% of the country's total energy consumption. Therefore, developing and using new energy and clean energy vehicles is crucial for promoting the low-carbon transition of transportation energy, such as reducing average power consumption to 12.0 kWh per 100 kilometers for electric passenger cars.

In summary, based on policy, market, and internal development needs, many enterprises have set their own carbon neutrality goals. According to statistics, more than 4,500 enterprises/institutions worldwide have set science-based targets, with 2,218 of these targets accepted by the Science-Based Targets initiative (SBTi).

For most enterprises, Scope 2 emissions from purchased electricity account for a large proportion of total emissions, making green power consumption the most direct means of reducing carbon emissions. However, how to consume green power is a challenge faced by many enterprises.

02How Do Enterprises Consume Green Power?

Currently, the main ways for enterprises in China to consume green power include the following four methods: directly participating in green power market transactions, investing in the construction of new energy power generation projects themselves or through third parties, purchasing green power certificates (green certificates), and establishing supporting energy storage facilities based on green power procurement and self-built new energy power generation projects.

1) Direct Participation in Green Power Market Transactions

The first method is direct participation in green power market transactions. In China, green power trading operates under a "certificate and power unified" model, where green power is the primary commodity traded, and the certificate obtained only serves as proof of using green power.

Green power trading is divided into intra-provincial and inter-provincial and inter-regional trading. Intra-provincial trading follows the rules of long-term intra-provincial power trading, with grid companies responsible for settlement and contract periods ranging from several days to one year.

In inter-provincial and inter-regional green power trading, point-to-point trading channels (direct trading between buyers and sellers) are not yet smooth, requiring provincial trading centers to act as agents for both parties. Additionally, contracts for inter-provincial trading are relatively complex.

Globally, long-term power purchase agreements—PPAs (Power Purchase Agreements)—have become the primary method for large-scale procurement of renewable energy by enterprises.

PPA contracts typically last ten to twenty years, during which the power generation and purchasing parties agree on a fixed price, which can mitigate the risk of electricity price fluctuations.

Currently, the signing of PPA agreements in China remains scattered, with limited information disclosure, but with the increase in corporate buyers' demand for green power procurement, PPAs are expected to see significant development in China.

Green power market trading is relatively flexible, achieving a unity of energy value and green value. However, there are still some barriers to inter-provincial and inter-regional trading, with procurement volume and prices heavily influenced by supply and demand within provinces. As green power trading reforms deepen, trading volumes are expected to grow significantly, making it the primary method for green power procurement in the future.

2) Investment in Self-Construction of New Energy Power Generation Projects

The second method is to invest in the construction of new energy power generation projects. With the development of new energy power generation technology and the overall increase in electricity prices, the economic viability of investing in centralized or distributed new energy power generation projects is gradually improving. This model effectively increases users' self-sufficiency in renewable energy and is an important way for tech companies to increase their renewable energy ratio.

Centralized new energy power generation projects are generally built in desert and Gobi regions with abundant sunlight/wind resources, connected to high-voltage transmission systems to supply distant loads. These projects are usually large-scale with high power output but have high construction costs and lower economic feasibility.

Distributed new energy power generation projects are generally constructed near power consumption sites, such as rooftops, factory roofs, etc., generating and using power locally.

Distributed photovoltaic projects are easy to construct, economically viable, and complement market-based green power trading, making them the simplest and most mature way for enterprises to obtain green power. Many tech companies have already participated in the development and construction of these projects.

3) Procurement of Green Power Certificates (Green Certificates)

The third method is for power-consuming enterprises to purchase green power certificates. A green certificate is an electronic certificate issued by the state for each 1,000 kWh of green power produced by power generation enterprises, serving as the sole proof of consuming green power.

Currently, the main recipients of green certificates are onshore centralized wind and photovoltaic projects. After the state issues green certificates to power generation enterprises, manufacturers can sell the certificates to enterprises, institutions, government agencies, and individual consumers with demand.

However, purchasing green certificates only grants the right to claim the use of green power and does not mean that the enterprise actually consumes the corresponding green power, making it difficult to track and record the actual consumption of enterprises.

The procedure for purchasing green certificates is simple, but they do not achieve a unity of certificate and power, having weaker effects on promoting the consumption of renewable energy and lacking high international recognition.

4) New Energy + Energy Storage + Demand Response

The fourth method is to establish supporting energy storage facilities based on green power procurement or self-built new energy power stations. Some enterprises have already begun exploring the installation of energy storage facilities on the user side to engage in power demand response business.

Through the installation of energy storage facilities, enterprises can improve their power usage management, perform peak shaving and valley filling, enhance their ability to consume green power, and reduce the cost of power procurement. However, this model has high investment costs, technical and operational difficulties, and is highly affected by policies.

With the increasing demand for flexibility resources in the power system, business models will become more flexible, and applications will gradually become widespread.

03Leading Enterprise Cases

1) Case Study of Chinese Tech Enterprises Consuming Green Power

2) Google Case Study

Google is the largest annual purchaser of renewable energy globally and has been a leader in deploying large-scale clean energy projects. We will use Google's renewable energy plans and practices as an example to provide some insights and inspiration for other enterprises looking to buy and use green power.

• In 2007, Google became the first company to achieve carbon neutrality in its operations by purchasing renewable energy projects and acquiring high-quality carbon credits.
• In 2017, Google became the first company to match 100% of its global electricity consumption with renewable energy.
• From 2010 to 2021, Google invested nearly $3.3 billion in renewable energy projects, with an estimated total capacity of about 8.7 GW.
• Achieving 100% renewable energy supply is just a temporary solution; Google has announced an unprecedented goal to operate on carbon-free energy 24/7 by 2030, meaning that its power supply will be completely decarbonized, every hour, every day, everywhere.
• Achieving 24/7 carbon-free energy is not easy, facing challenges such as regionally and temporally constrained wind and solar resources, limited clean energy trading policies and market mechanisms, and expensive renewable energy development technologies.
• To achieve this goal, Google has taken numerous measures:
• In 2019, Google made what was then the largest corporate purchase of renewable energy in history.
• Since 2010, Google has added more than 25 wind and solar projects (with a total generating capacity of over 3 GW) in various data center regions, significantly improving the hourly load matching level between data centers and local carbon-free energy supplies.
• Additionally, to address the issue of single-source renewable energy failing to perfectly match the 24/7 load of data centers, Google will invest in a wider variety of clean energy sources (such as solar, wind, nuclear, geothermal, etc.) and more advanced generation technologies (such as low-cost energy storage, carbon capture and storage, etc.).
• Google also collaborates with partners to help commercialize new technologies, develop and advocate for clean grid policies, continuously apply Google’s own software and machine learning to optimize the industry's clean energy, and share experiences and technologies.

04) Carbonstop Perspective

First, enterprises that have made or plan to make carbon reduction commitments or carbon neutrality commitments, along with their upstream supply chain enterprises, can reduce Scope 2 emissions by purchasing green power, which is currently the most popular choice.

According to data, Beijing Electric Power Trading Center actively promoted green power trading and innovatively conducted green certificate trading in 2022, settling green power trading volumes of 15.22 billion kWh, with an average premium of 51.83 yuan per MWh.

Second, while green power resources continue to be developed, they are limited in the short term, and enterprises need to prepare early and plan ahead.

Third, PPAs are more mature overseas, but in China, current green power policies update rapidly, and prices are mainly influenced by supply and demand, making long-term agreements less feasible.

Fourth, from the innovation journey of Google's renewable energy practices, we see that consuming green power is an essential part of achieving corporate sustainability.

However, even 100% green power usage cannot guarantee that the entire process is clean and carbon-free. Achieving 24/7 carbon-free energy will be a target for more enterprises in the future. Realizing this challenging goal requires improvements in policy mechanisms, innovations in energy technology and business models, and partnerships between government agencies, organizations, and suppliers.