Smart Energy Voices - Episode 107

Heard at REF: The Continued Evolution of Offsite Renewable Purchasing

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The Continued Evolution of Offsite Renewable Purchasing

The landscape of offsite renewable purchasing is evolving, impacted by rising costs of power purchase agreements (PPAs) due to increasing demand, supply chain issues and interconnection challenges. Despite a recent slight decrease in PPA prices, future prices are expected to remain high.

A developing trend is to make renewable purchases more impactful by incorporating additional social and environmental benefits. Penne highlights how large corporations, particularly Fortune 100 companies, now demand people-focused, community-focused and environmental-focused initiatives to be packaged into large renewables deals.

Penne anticipates these types of market innovations will continue to accumulate, with competitors developing similar programs and the emergence of "impact RECs" being traded. Platforms like LevelTen post impact scores for developer projects, making information about these intangible benefits more accessible and likely accelerating their adoption.

Increasing Demand and Market Challenges

There is an increased demand for PPAs and integrated solutions as companies rush to meet their 2025 and 2030 sustainability goals. Many companies are renegotiating PPAs due to project delays or failures, leading to a rebound in demand. Additionally, more companies are seeking to reduce their carbon footprints, driving the need for creative solutions from suppliers like Constellation.

Constellation is addressing the challenges of increasing demand for renewable energy amidst market obstacles. They focus on strategies such as aggregating projects to make them accessible to smaller companies and offering better credit options. They are also exploring ways to arbitrage REC values to maintain additionality claims while offering relief on costs when REC prices are high, as well as looking beyond traditional wind and solar projects to include smaller, emerging technologies.

Navigating the Changing Marketplace

Understanding the greenhouse gas accounting associated with new structures and ensuring projects meet additionality criteria are crucial skills. Penne underscores the impact on accounting methodologies and ESG targets if these criteria are not met, suggesting companies consider dedicated greenhouse gas accountants for their sustainability teams.

Hourly Carbon-Free Electricity

There’s a growing demand for 24/7 carbon-free electricity, and Penne highlights several developments — like the adaptation of ISOs and REC registries — that support hourly carbon-free electricity transactions. Initiatives like EnergyTag set standards for verifying 24/7 clean energy claims, ensuring transparency and reliability in the market, and suppliers like Constellation are expanding offerings beyond traditional PPAs to meet diverse customer needs.

Penne advises companies currently not ready for full 24/7 matching to start measuring their emissions, understand their consumption patterns, and collaborate with suppliers to bridge gaps in their clean energy goals incrementally. Overall, collaboration across industry stakeholders is also essential to solving the complex challenge of achieving a fully decarbonized electricity grid efficiently.

Connect with Luke Penne

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