Top tips: Renewable electricity procurement
1. Start with your electricity requirements, not the solution
In developing your requirements, consider your target goal and how your electricity needs may change with your business strategy. Set incremental milestones to be achieved along the way and the important factors for your organisation, like behind the meter generation, or how to integrate renewable electricity with your electricity contracting arrangements.
Addressing scope 2 emissions can be achieved in a variety of ways. PPAs may be thought of as the ideal solution, although they are rarely practical for organisations with smaller electricity demands.
When determining electricity requirements, also think about the claim and the marketing opportunities as a commitment that is also important to your customers, clients, staff, investors and shareholders to credentialise and avoid greenwashing accusations. For instance, if your organisation is looking to promote its renewable electricity credentials, decide whether a specific selection of generation technologies or assets would support your organisation’s vision.
This requirements list will continue to add value when engaging with the market, retailers or industry bodies. It enables them to understand what is important to you and provide fit-for-purpose options.
2. Be open to innovations and be prepared to pivot for potential changes in the landscape of work
Prior to 2019, it would have been challenging to predict the fundamental shift towards the hybrid work culture which has been exacerbated by COVID-19. Large organisations who have announced more permanent work-from-home policies will need to consider the impacts of this on their decarbonisation progress and energy consumption forecasts. Hybrid policies will need to be factored into future electricity procurement considerations, with a growing number of organisations now embedding household renewable electricity options for their staff into their procurement requirements.
3. Be aware; price is not the only indicator of ‘cost’
Fixing a long-term contract against possible future changes in load will need to be considered when identifying the renewable solution best for your organisation. This includes the ongoing management costs across your finance, accounting and legal teams to maintain complex electricity contracts like PPAs.
Buyers should be aware that PPAs can be an intensive process to source, negotiate and manage on an ongoing basis and still require the voluntary surrender of LGCs to count towards renewable energy. They are usually longer-term contracts that are subject to a number of accounting and tax considerations. From an accounting perspective, PPAs need to be carefully analysed and may be subject to ongoing valuations, which could introduce volatility into the balance sheet and profit and loss statement8. It is recommended professional advice is sought so buyers are aware of the risks before they commit and will be able to meet ongoing obligations. For more information, please see our publication focussed on PPAs.
While the confirmation of LGCs as part of the CERT report should simplify the procurement of renewable electricity in Australia for organisations with smaller energy needs, we note there is still a place for more complex arrangements like PPAs, particularly for larger electricity consumers and potentially partnering across value chains working together on scope 3 emission reduction efforts.
