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July 2, 2020

How can corporates ensure a more impactful renewable energy procurement

It is no longer a topic of news that corporations are buying more renewable energy than ever before. Decrease in costs, stakeholder pressure on sustainability and regulatory trends have brought more than 220 companies to pledge 100% renewable commitments.

Instead, the recent hot topic of sustainability leaders is focused on taking a more impactful renewable energy choice: purchasing the type of renewable energy that can have the biggest impact in the energy transition. Because not green energy is equally green.

10 years ago a building owner was clarifying if it had energy efficiency solutions installed or not. A binary choice. After reaching industry maturity, energy efficiency labels have been imposed, becoming a more sophisticated field.  This same level of sophistication is now arriving in the renewable energy space.


Companies can purchase different renewable energy products: (1) unbundled energy attribute certificates, (2) green energy tariffs from utilities , (3) Power Purchase Agreements - long term bilateral agreements directly with the energy producer and (4) producing their own electricity on-site.


Each of these renewable energy products has different levels of environmental impact.

So what are the most important parameters to achieve leadership in impactful renewable energy procurement, according to corporates interviewed?


One very important parameter in selecting the source of renewable energy is additionality: the extent to which the selected sourcing mechanism stimulates investment in renewable energy by creating new renewable energy generation assets. For this reason, a direct link between an energy generation asset and a consumer is key. Consumers need to know where their money flows: newly built plants from project developers that reinvest profits is the ideal objective. Consumers need to be ensured that the environmental benefits they are paying for are legitimate and would not have been delivered otherwise.
Energy Attribute Certificates coming from old power plants that have already been funded put in question the reinvestment of those funds into new assets.


This is connected with the second important criteria that corporates are looking after when buying renewable energy: proximity.
Enabling cleaner air for a local area by replacing fossil fuel plants with renewables is part of EU Commission's Green Deal. Moreover, local economies and job creation are fostered, which creates a stronger social impact case for a corporate.
Consuming from local energy sources also helps distribution system operators to reduce grid congestions and therefore reduce costs.

At the present moment EACs (Energy Attribute Certificates) already certify that the energy comes from a renewable generation plant and, in some countries,  it explicits the location and the age of the plant. However, this information is not always easily accessible by the energy buyer. Often the information is stored in back-office registries managed by energy certificate suppliers. Excel files and calls are crossed between consumers and certificate suppliers, turning the process cumbersome and prone to errors. Therefore, checking additionality and proximity is not easy for corporates when buying green tariffs or unbundled energy attribute certificates.

The third most important parameter in assessing the sourcing options is emissionality. Emissionality refers to the avoided carbon emissions from the renewable energy sourcing. The carbon intensity of energy is a dynamic value that depends on several geographic, meteorological, temporal and usage variables.
Nowadays there is a big misconception that being powered by 100% renewable energy implies being net-zero emissions. Any company today can claim to be 100% renewable by simply buying an amount of Energy Attribute Certificates that equals their consumption (in MWh). The problem is that these certificates are not based on time: they do not carry an hourly stamp. This means that at the end of the year a company could calculate their final energy consumption and buy an equivalent amount of certificates for the cheapest price, to testify that the same amount of renewable energy was injected in the grid somewhere,at some point in time.

These calculations rely on monthly or yearly average aggregated data, disregarding the fact that the carbon content of electricity varies substantially throughout the day and depending on the location and weather conditions.

This is the reason sustainability leaders such as Google have already taken action to map out if they are carbon free every hour, despite being 100% renewable over the year.

The Internet is 24x7 - Carbon free energy should be too.



Figure 1: Google publication on 24/7 carbon free energy

Other corporate examples such as car manufacturer Daimler or telco giant Telefonica also have secured 24/7 sourcing of renewables recently. 


Leading organisations such as RE100 have also published a guide on impactful energy procurement with a longer list of case studies.


So how can a company claim, prove and communicate an impactful renewable energy procurement?

By requesting data transparency from the energy source to their energy supplier. Despite the limitations of the Energy Attribute certificate system that was mentioned before, new technologies allow for direct traceability of energy to a production plant. Not as a substitution of a certificate, but as a transparent addition to it.

Tracking the energy flow of green electrons is impossible for physical reasons, all energy is mixed into the grid. However, it is possible to digitally match production data to consumption data in real-time. Hence a company could ensure that a solar plant located 50km away from their factory was producing the exact 100kWh that the factory was consuming on a Monday at 2pm.
This real-time data stream can include information on location of the production asset, age of the plant, technology type and CO2 emission factor of the grid in that hour. With this traceability, companies can make sure they know that their money is flowing into investment of new plants in proximity. Only by having this hourly data transparency corporates can ensure zero carbon energy sourcing. And, of course, Energy Attribute Certificates are still received at the end of the month or year for regulatory compliance.

Energy Attribute Certificates do not certify energy on an hourly basis - so who is doing that?

Hourly certification of renewable energy needs to be linked at the end of each month to an Energy Attribute Certificate. This granular certification can be done by human auditors manually, although the costs do not compensate for the benefit.
For this reason the adoption of distributed ledger technologies such as blockchain has gained traction in the market as the most cost-effective alternative to human certification of energy. This decentralised database can record a “digital unit of energy” produced (token). It can then ensure that there is no double counting in the transfer and the claim of that certificate to a consumer. Corporates get the peace of mind that any third party can audit the immutable registry to check the correct environmental claims. Energy-efficient blockchains such as the Energy Web Blockchain - validated by large energy companies, regulators and startups - are the most suited for such a use case.


Renewable energy traceability has gained popularity in the last few years among Fortune 500 companies given the rise of sustainability leadership initiatives. FlexiDAO has been supporting them over the globe by tracking more than 3TWh per year of renewable energy directly from production plants, with an audit trail on the blockchain. 

Needless to mention is that all green energy sourcing that is on-site or connected by “direct cable” is the greenest option possible and traceability is not required in those cases.

For all the remaining renewable energy products such as Unbundled Certificates or Green Energy tariffs, sustainability and energy managers can now make sure that they obtain the necessary data transparency to claim additionality, proximity and zero carbon energy.

To learn more about renewable energy traceability and sustainability leadership, corporate buyers and energy suppliers can contact Joan Collell (j.collell@flexidao.com).


JOAN COLLELL

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