The Importance of a Green Energy Procurement Strategy
The procurement of green energy is a hot topic at the moment as companies across the globe want to be seen playing their part in the fight against climate change. This trend has led to an explosion in demand for green energy through outlets such as Power Purchase Agreements (PPA’s) and green certificates. In January, BloombergNEF reported that 2019 was a record year for corporate PPA’s. Records are also being broken in the green certificate market with demand for European GO’s passing 500 TWh in 2018, according to Ecohz.
However, green energy procurement can be a confusing endeavor for companies just starting to get involved. PPA’s are complex contracts which pose a risk to a company that doesn’t fully understand their terms. Renewable energy certificates usually lack transparency, as discussed in our other post here. In addition, there is constant change in what is deemed acceptable as impactful green procurement. Therefore, those not keeping up to date with the market can find themselves out of the loop with current thinking, very quickly.
Why is a Green Procurement Strategy Needed?
Procuring green energy without a long-term strategy will not yield the desired results. The procurement department within an organization is under constant change with employees moving jobs, leaving the business, or downsizing of teams due to budget constraints.
Different employees have different personal goals and agendas which means two different energy procurement managers could have different interpretations of what green energy is. With employee changes, it’s conceivable that without a long-term green energy procurement strategy, the type of green energy and impact it has, can change on an annual basis.
Creating a strategy also sends a message to a company’s customers and suppliers that you’re getting on board with the fight against climate change. And gives a chance to set out a roadmap to achieving high-levels of clean energy in a reasonable timeframe.
What are my Green Procurement Options?
Before we look at how to create the strategy, it’s worthwhile to do a refresher on what green procurement options are available. These can be simply categorized into four main areas — Unbundled RECs, Green Tariffs, Power Purchase Agreements (PPA) and On-site Generation.
All options will ultimately get to the same end goal — allowing to report zero carbon under Scope 2 emissions reporting — but there are pros and cons of each option. Some of the pros and cons are summarized in the below table for the various green procurement options.
How do I Create my Strategy?
So how would a company approach green energy procurement strategically?
Keep on reading here!