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Increasing Business Use of Renewable Energy: Additionality, Aggregation and Engaging the CFO

Rebecca Fay | 12 January 2017 |

Hosted by General Motors, the Business Renewables Center (BRC) workshop held in Detroit at the end of last year gathered renewable energy developers, buyers, service providers and policymakers to discuss and agree the most effective ways to increase corporate uptake of renewable energy.

Increasing Business Use of Renewable Energy: Additionality, Aggregation and Engaging the CFO

BRC membership has grown by more than 100 companies in the past year, while the number of companies committed to sourcing 100% renewable energy through RE100 has more than doubled in the same time period. Although these figures indicate progress in corporate renewable energy uptake, significant areas of untapped demand remain.

At BRC, 171 businesses are united in their ambition to accelerate corporate purchasing of off-site renewable energy. The BRC workshop is considered an assembly of the entire renewable energy system with participants representing the companies and market players which are fuelling the growth of renewable energy in North America and beyond.

The role of the conference is to tap the combined knowledge, experience and requirements of the participants in working sessions which debate some of the critical challenges to increasing the purchase of renewable energy. Each workshop leads to a set of specific recommendations and actions. At the November event, three of the top themes were: increasing renewable energy access, developing project-based additionality standards and building support from Chief Financial Officers (CFOs).

Increasing renewable energy access: Aggregating smaller renewable energy purchasers

The number of large corporates committing to renewable energy sourcing is rising, with 32 corporates, most of which are FTSE 500 companies including Microsoft, Philips and Salesforce, signing Power Purchase Agreements (PPAs) to date. However, PPAs require a long-term financial commitment which tends to be difficult for smaller purchasers to make.

One solution to this challenge is aggregation, which can enable smaller businesses to engage in the market. Although renewables aggregation is already taking place, there are not many examples to learn from and there is consequently no leading aggregation business model or deal structure. In addition, combining private sector demand for renewables in a way that is attractive for project developers can be complex and it may be difficult to address the needs of all companies involved.

As more and more companies of all sizes become interested in purchasing renewable power, one of the top industry priorities highlighted at the workshop was to establish replicable models for aggregation. BRC will continue working with its members to develop successful aggregation models that work for developers, aggregators and buyers.

Enabling buyers to claim additionality

Additionality is not required nor clearly defined for use in renewable energy purchases, however increasing numbers of buyers are seeking it. In the carbon markets, projects must demonstrate that if carbon finance were not available, the project activity, and therefore the emissions reductions generated by the project, would not be viable, therefore ensuring additionality for buyers of the carbon credits. With the interest in additionality at the BRC workshop, the participants agreed that there is an immediate need to define the term for renewable energy production and develop guidelines on how market participants can evaluate the additionality of transactions.

Developing a project-based standard similar to the standards used in the carbon market was discussed as a possible solution which would define the quality attributes and additionality requirements for renewable energy.

At the moment, businesses purchasing renewable energy certificates are purchasing the environmental attributes of a MWh of renewable power produced, which is not project specific. With a project-based standard, the actual renewable production site will be certified in line with defined quality criteria which would include the definition of and demonstration of additionality. It would also define an accepted period of time for which certificates can be generated and considered additional – the crediting period.

It is through this sort of approach that investors and aggregators can have the confidence they need to support renewable energy projects that are guaranteed to maintain their value over time, and energy buyers have the reassurance that they are contributing to something new. Currently the Gold Standard – known for its work in the carbon markets – is one of the organizations considering ways in which project-based approaches may work for renewable energy to meet these requirements.

Getting your CFO on board

Although there are obvious reporting and brand-building benefits to purchasing electricity from solar, wind and other renewable sources, energy managers and finance teams need to see a robust business case in order to make long-term investments. Workshop participants suggested that businesses will be in a better position to invest when they involve financial organizations and their CFOs, and make them active participants in early discussions about renewable energy sourcing options. This, along with accurate cost-benefit analysis based on a company’s environmental and commercial goals, will help to form the best renewable energy solution for the business and ensure that senior executives are supportive for the long term.

The BRC workshop gathered industry experts to discuss the big challenges and opportunities of corporate renewable energy purchasing. Working together to produce solutions for aggregation, additionality and CFO engagement will rapidly accelerate the production and consumption of renewable energy. Stephen Killeen, CEO of Natural Capital Partners, commented: “We are confident that working with the BRC and its members will enable us all to develop the flexible solutions for businesses of all sizes to purchase more renewable energy structured in the best way for their specific requirements.”