Reaching Sustainability Goals Through Renewable Energy Procurement
As we continue our series exploring strategies organizations can implement to reduce their carbon footprint, let’s explore another step in the sustainability journey – integrating renewable energy purchases to achieve sustainability goals.
Understanding Renewable Energy Purchasing Models
The integration of renewable purchasing is a popular, but potentially complicated, a step in meeting sustainability goals that can significantly cut your company’s market-based Scope 2 greenhouse gas (GHG) emissions. There are several models for organizations to leverage for offsite renewable energy procurement, each with its own structure and benefits.
Power Purchase Agreements and Virtual Power Purchase Agreements
Power Purchase Agreements (PPAs) and Virtual Power Purchase Agreements (vPPAs) are both important tools that enable businesses to procure renewable energy. The key difference between the two is the physical versus financial nature of the agreements. Generally speaking, PPAs involve the physical delivery of electricity and environmental attributes, while vPPAs replicate the financials of the underlying PPA and provide the environmental attributes without providing the offtaker with physical electricity.
Both agreements have their own set of advantages that align in several key areas. Each model provides a way for organizations to support renewable projects, such as the purchase of renewable energy certificates (RECs) to help reach sustainability goals and establish longer-term partnerships with developers, which can help reduce carbon footprints. Determining whether a PPA or vPPA better meets a company’s renewable energy goals depends on the specific priorities and risk tolerances of each business.
Using Retail Supply Contracts to Integrate Renewable Purchases
Retail supply contracts allow companies to purchase renewable energy bundled with their electricity service in competitive markets.
Constellation offers simplified retail solutions through our Constellation offsite renewables (CORe) products:
- CORe provides access to existing renewable projects, bundling the energy and RECs into retail power supply.
- CORe+ allows customers to support the development of new renewable energy projects and provides bundled RECs and load-following electricity in a retail supply agreement.
Constellation uses its extensive experience to find attractive renewable energy projects for customers. We review each project based on factors like cost, developer reputation and project status. Then, Constellation enters into a physical PPA with the developer of the project, handling the complex contract details and project negotiations. The end customer then signs a simplified retail power contract that provides the economic and sustainability benefits of the PPA. This provides customers an easy way to buy verified renewable energy from renewable projects, without having to take on the complexities of direct renewable energy contracts. And with Constellation’s ability to size your offtake to meet your usage, CORe products also allow smaller customers that aren’t able to contract for the full output of a large, offsite renewable development to still realize the economies of scale these opportunities provide.
- Contract Term: 10 – 20 years
- Price Structure: Option to elect a fixed rate for bundled electricity + RECs for portions of the term
- Emissions Reduction: Directly reduces market-based Scope 2 emissions from the electricity purchased
Choosing the Right Renewable Energy Solution
There is no one-size-fits-all strategy. The questions below can help businesses identify the model that best aligns with their sustainability goals and organizational priorities:
- Sustainability goals: Will purchasing RECs drive sufficient progress or are additional emissions reduction strategies preferred?
- Risk: Can you handle the hourly settlement risk associated with PPAs or vPPAs, or do you prefer being able to have fix pricing through a retail supply contract?
- Project preference: Do you want the ability to identify the specific source of renewable energy supply?
- Contract term: Can you commit to 10-20 years?
Organizations should analyze their specific needs and sustainability objectives to determine the optimal purchasing solution. The right approach will depend on factors like emissions reduction targets, budget, desired contract term, and sustainability goals.
Take Action Today
Make progress on your sustainability goals with Constellation’s CORe and CORe+ products that provide flexible options to simplify renewable energy purchasing. Constellation’s team helps businesses find the ideal purchasing strategy to meet their budget and sustainability goals, so you can focus on your business.
Contact us to discuss renewable energy supply and start reducing your environmental footprint today.
Learn more about building your sustainability roadmap with our new white paper.
Interested in reading our previous posts in this series? We’ve explored critical foundations like establishing your GHG emissions baseline to understand your current footprint, connecting energy usage to business goals to drive reductions, implementing energy efficiency to reduce consumption and decarbonizing your energy supply through RECs and EFECs . With the foundational strategies from these four blogs, your business should be well equipped to continue your business’s sustainability journey.