Article
28 Sept 2023
Global3 min read

Renewable Energy Procurement Trends and Strategies

One of the most exciting transformations linked to climate change mitigation is happening in the renewable energy market. Companies are stepping up to the plate by decarbonizing their use of electricity. How are they doing it?

One of the most exciting transformations linked to climate change mitigation is happening in the renewable energy market. Companies are stepping up to the plate by decarbonizing their use of electricity. How are they doing it?

Recent Trends in the Renewable Electricity Markets

Renewable energy procurement has surged globally, primarily due to businesses aiming to address sustainability and price volatility. Companies, inspired by emissions reduction targets, align their annual electricity use with clean generation using strict quality criteria. Initiatives like RE100 are driving corporations to commit to 100% renewable electricity, with members currently securing 249TWh of clean power and needing 290TWh more by 2030, according to Bloomberg NEF projections.

Moreover, there is a growing interest in innovative strategies to enhance the impact and flexibility of renewable energy. Some companies are exploring dynamic demand adjustments, even on an hourly basis, which requires developing diverse clean energy supply options. RE100 recently introduced criteria related to renewable facilities’ commissioning or repowering dates to focus on additionality. These factors, coupled with electricity price volatility, are driving longer-term contracts, enabling project development and reinvestment in additional renewable capacity. Corporate Power Purchase Agreements (CPPAs) have recently become “buzz words”, but they are not magic wands. A good energy procurement strategy needs to adapt to individual companies' circumstances and specific market conditions.

Three Approaches to Renewable Energy Procurement

Companies have three primary avenues to explore in renewable energy procurement:

  • Energy Attribute Certificates (EACs): EACs confirm the generation and delivery of 1 MWh of clean energy to the grid. When a company purchases EACs, they gain ownership of the sustainability claim linked to that energy generation. EACs are known for their ease of procurement and cost-effectiveness.

  • Power Purchase Agreement (PPA): A PPA is a long-term contract between a renewable energy developer and a buyer. It involves the purchase of clean energy (power and associated EACs) from a specific asset at a predetermined price. This enables buyers to claim the environmental benefits of these EACs. PPAs offer price stability and facilitate renewable energy procurement in tight markets.

  • Virtual Power Purchase Agreement (VPPA): A VPPA is a contract between a renewable energy project developer and a buyer, usually a corporation. In a VPPA, the buyer commits to buying a specific amount of renewable energy from the project over a set time. Unlike a traditional PPA, where the buyer uses the power generated by the project, in a VPPA, the power is sold to the grid. The buyer benefits financially from the price difference between the contract and market electricity rates. The buyer also receives renewable energy certificates. Companies often choose VPPAs to benefit from price stability and cut their carbon emissions with additional flexibility.

Choosing the Right Path

In the dynamic renewable energy market, various procurement options cater to diverse business needs. There is no one-size-fits-all solution, as each alternative comes with its own set of advantages and disadvantages. The key is to identify the option that best aligns with your company's unique requirements and the conditions of the markets in which the company operates.

To assist organizations in navigating this complex landscape, Strive By STX, the climate action arm of the STX Group and a CDP Gold Accredited Solution Provider, is co-hosting a webinar with CDP. This webinar will delve into the different perspectives of renewable energy procurement, emphasizing current trends and strategic options. Industry leaders who have firsthand experience with these alternatives will share insights and the rationale behind their choices.

Join us to explore the full range of renewable energy procurement options and gain valuable insights from industry experts, by registering for our upcoming webinar.

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