This is an extract from a recent report titled “Advancing Corporate Procurement of Zero-Carbon Electricity in the United States: Moving from RE100 to ZC100” by Dr. Melissa C. Lott, Senior Research Scholar and the Director of Research, Center on Global Energy Policy at Columbia University SIPA and Bruce Phillips, Director, The NorthBridge Group.
In recent years, many large companies have set public goals to increase the amount of their electricity consumption that can be supplied by renewable sources. These companies have largely procured this renewable electricity in quantities that are equal or proportional to the amount of electricity that they consume at their facilities on an annual basis.
Four main methods are currently used by companies to meet their stated goals relating to renewable electricity procurement.
- Deploying distributed renewable generation resources (e.g., rooftop solar panels) on-site
- Purchasing renewable energy certificates (RECs) that are generated by renewable electricity generation sources
- Purchasing electricity from local utility distribution companies via green tariff programs designed to provide compensation for renewable energy sources that the utilities have procured directly
- Entering into PPAs with new renewable electricity generation suppliers
In a deregulated market, a buyer can purchase either all or a portion of the electricity output from a new wind or solar facility for a fixed length of time (i.e., via PPAs). Alternatively, a retail access customer in a deregulated market can choose a 100 percent renewable or “green” contract from a competitive retail supplier, who in turn would contract with renewable developers or purchase and retire renewable energy certificate (i.e., a “REC” purchase or indirect PPA).
In some regulated markets, a buyer can indirectly purchase either all or a portion of the electricity output from a new wind or solar facility for a fixed length of time with a green tariff or sleeved contract from the incumbent utility. In each of these examples, large corporate buyers enter into an agreement with renewable energy generators (directly or indirectly) to purchase some or all their facilities’ output. The RECs associated with the output of these renewable generation units provide generators an additional revenue stream to facilitate the development and operation of these renewable energy plants.
While buyers undertake different purchasing strategies to meet their goals, most buyers have focused on purchases of wind and solar generation (e.g., via power purchase agreements or green tariff arrangements) and/or the environmental attributes (e.g., renewable energy credits) associated with wind and solar generation. Whereas unbundled RECs have become less popular due to criticisms of their inability to support new, additional renewable resources in the electricity sector, PPAs have gained traction over the past several years. This “additionality” principle was highlighted by Google in its December 2016 white paper as a key component in its procurement structure.
By procuring renewable energy through PPAs and the like, companies have enabled the development of many gigawatts (GW) of new renewable generation capacity. From 2014 to 2018, large companies announced transactions with off-site renewable energy projects representing over 15 GW of generating capacity—roughly equal to one-quarter of all renewable capacity installed across the United States during that time. Furthermore, corporate-driven procurement of renewables has offset declines in non-corporate (e.g., utility or retail supplier) renewable procurement in recent years.
The demonstrated ability of corporate purchasers to meaningfully increase the deployment of renewable energy is clear. But the degree to which current procurement methods are aligned with efforts to achieve full decarbonization of the power sector and the economy is limited.
The complete report can be accessed here