Purchase Off-Site Renewable Energy
Environmental Defense Fund
Purchasing off-site renewable energy means buying renewable energy (such as wind or solar power) from sources that are not located on your company's physical property. It is an effective way to reduce your reliance on fossil fuels and meet your company’s sustainability goals.
Off-site renewable energy purchase is a growing trend among companies and organizations looking to reduce their carbon footprint and transition to renewable energy sources. It can also assist your company in achieving its sustainability goals and saving energy costs.
Identifying your organization’s energy needs is an important first step in purchasing offsite renewable energy. To determine your energy needs, you’ll need to review your organization’s historical energy consumption data to determine your energy usage patterns. This information will help you to understand energy consumption over time and identify peak demand.
Once you’ve identified your organization’s energy needs, you can determine the amount of renewable energy that you’ll need to purchase. This will help you to select the appropriate procurement strategy that can meet your organization’s energy needs and help you achieve your energy goals.
Determine Your Procurement Strategy
There are several procurement strategies available, including power purchase agreements (PPAs), virtual power purchase agreements (VPPAs), and green tariffs.
- Power Purchase Agreements (PPAs): PPAs are contracts between a renewable energy provider and a buyer. In a PPA, you agree to purchase a certain amount of energy from the provider over a specified period. The provider agrees to build and operate a renewable energy facility to supply the energy and bears the risks associated with the project. PPAs provide long-term price stability, fixed energy costs, and a hedge against rising energy prices. PPAs create additionality, or new renewable energy in the system, which helps our communities transition to a lower carbon future.
- Virtual Power Purchase Agreements (VPPAs): In VPPAs, the renewable energy provider owns and operates the renewable energy facility, and the buyer purchases the renewable energy credits (RECs) associated with the energy produced. VPPAs are like PPAs, but you do not take physical delivery of the energy. Instead, your company purchases RECs that represent the renewable energy generated elsewhere. Your company will typically pay a fixed price for the RECs, which are then retired to demonstrate the use of renewable energy. VPPAs have low upfront costs, provide flexibility, and have no physical infrastructure requirements on your property. Because VPPAs represent new renewable energy generation somewhere, they also add additionality, but often in a different market.
- Green Tariffs: Green tariffs are offered by utilities and allow customers to purchase renewable energy from off-site sources. The cost of the renewable energy is added to your company’s utility bill. Under a green tariff, the utility negotiates with renewable energy providers and purchases the renewable energy on behalf of its customers. The renewable energy provider sells the energy to the utility at a fixed price, which is then passed on to customers. Green tariffs provide several benefits to buyers, including a lower barrier to entry, no upfront costs, and a simple and convenient way to purchase renewable energy. Because green tariffs depend on the structure the utility chooses, the amount of additionality realized through this strategy can vary.
Some other strategies for procurement are:
- Direct Access: In some states, companies can purchase renewable energy directly from independent power producers, bypassing the utility. Direct access provides companies with greater control over their energy supply and may offer cost savings and increased flexibility.
- Community Solar: Community solar projects allow multiple customers to purchase a share of a larger solar installation. Customers receive credit on their utility bills for the energy generated by their share of the installation. Community solar can provide a low-cost option for companies to purchase renewable energy.
Finding the right supplier for offsite renewable energy can be a challenging task. It can also vary significantly based on the chosen procurement strategy. For example:
- For PPAs you may seek a supplier that has a proven track record of developing successful projects, as well as a strong financial standing to ensure they can deliver on the contract. Additionally, the location of the supplier’s projects and whether they align with your organization’s energy needs is also important
- When selecting a supplier for a VPPA, the supplier’s track record of successfully generating and retiring RECs is crucial
- For Green Tariffs, the utility’s track record of providing renewable energy and their pricing structure compared to other suppliers in the market are relevant factors. Also, consider whether the utility’s renewable energy projects align with your organization’s energy needs
- In direct access and community solar, project location, pricing structure, energy supply, and track record in successfully delivering energy to customers are important factors
Overall, when selecting a supplier, it’s important to evaluate the supplier’s experience, track record, and ability to deliver the specified amount of renewable energy over the contract period. Working with a reputable supplier can help ensure that your renewable energy system operates efficiently and helps your business achieve its sustainability goals. To find a reliable and reputable supplier you can consult with renewable energy experts or consultants.
Other ESG Impacts
When purchasing off-site renewable energy you should consider the greater ESG impact of your company’s engagement with the project. Consider using The Nature Conservancy’s ‘3Cs’ approach to expand your renewable energy procurement impact: Communities, Conservation, and Climate. When selecting renewable energy projects to support, you can complete due diligence to align your renewable energy strategy to these values. For example, is the local community opposed to the project? Did the project impact wetlands or cause deforestation? Does the project credibly create additionality? These, and similar, questions are important to ask as you consider purchasing off-site renewable energy. Also understand the benefits your purchase can have, such as job creation and investment in a community, additionality, and reduced pollution.