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Posted 8 months ago | 8 minute read

Energy procurement for decarbonisation

Large energy buyers play an important role in the clean energy transition. But they will need to go further and expand their approaches to clean energy procurement and demand flexibility.

Large buyers can undertake advanced forms of procurement and practices. Matching clean energy purchasing with the timing of their energy use, incorporating demand flexibility, purchasing dispatchable clean electricity, adopting enabling technologies (such as energy storage), maximizing emissions reductions, reducing costs and driving the transition to clean energy.

In a report, published earlier this year, the World Resources Institute (WRI) outlined the importance of large energy buyers in reaching net zero and urged them to focus on how, when, and where they are procuring and using energy.

The report highlighted the efforts of companies including Google; Microsoft; Apple; and cities including Des Moines and Sacramento to alter their procurement practices with a focus on firm resources, reducing near-term emissions reductions, or enabling battery storage and carbon capture. It outlined a number of procurement strategies, which it said could support efforts to decarbonise the sector.

Time-coincident renewable procurement

Time-coincident renewable procurement is the practice of purchasing clean energy that aligns with an individual buyer’s load on an hourly basis and in the local grid. But the WRI noted that there are various levels of sophistication.

Time-coincident procurement may involve additional costs, particularly at higher matching percentages, that may need to be weighed against other strategies considering grid needs.

Challenges also exist regarding development and issuing of hourly certificates or a different tracking and verification instrument for hourly accounting, interactions among hourly certificates and other instruments, and the availability and credibility of hourly data. Scope 2 emissions accounting does not provide an incentive for buyers to do time-matching as reporting and claims protocols (such as the Greenhouse Gas Protocol) allow buyers to simply report matching annual consumption with annual clean energy purchasing.

Demand flexibility

While not strictly a renewable procurement action it does speak to enhanced corporate responsibility, demand flexibility refers to the inherent ability of certain loads to be shifted in response to economic, grid or environmental objectives.

Existing regulatory and market structures may undervalue demand-side services. Electricity rate structures, particularly among smaller buyers, often provide only weak incentives for demand flexibility. A Further, various economic and market factors pose barriers to wholesale market access for demand-side measures.

Firm clean procurement

In contrast to variable clean energy generation, “firm,” or “dispatchable,” resources can generate electricity on demand as needed. Firm clean energy technologies include some forms of hydropower, geothermal, and biomass resources.

Firm clean energy technologies can cost more per unit of energy than variable clean energy options such as solar and wind. Much of the easily accessible hydropower and geothermal resources have already been tapped in developed countries. However, there can be opportunities for development at some existing projects and for enhanced geothermal technologies that are less geographically constrained. Transaction structures for newer technologies are also less mature than transaction such as power purchase agreements for established technologies such as wind and solar.

Emissions-Based Procurement

Buyers can factor emissions abatement potential directly into their procurement decisions and prioritization of projects. In considering emissions abatement potential, buyers have three primary levers:

Balancing abatement potential with other procurement factors (e.g., time coincidence) may be challenging. Emissions-based procurement could be evaluated on the marginal emissions displaced by clean energy generators. However, marginal emissions data are not often disclosed by grid operators, forcing buyers to rely on predictive modelling or accessible proxy measures.

Enabling technologies

Large-scale grid transformation will require rapid increases in clean energy generation supported by enabling technologies such as energy storage, load controls, electrification of buildings and vehicles, or carbon capture. Large energy buyers can drive grid transformation by incorporating these enabling technologies into their portfolios.

Relatively high up-front costs remain the primary barrier to energy storage, though costs are falling rapidly. Existing wholesale market rules generally undervalue energy storage by limiting the services that batteries can bid into wholesale markets, although recent market reforms have begun to address these barriers.

GridBeyond CEO & Co-Founder Michael Phelan, said:

“To enable transformative clean energy procurement practices, the right incentive and reward structures must be present to encourage buyers to undertake advanced procurement measures, particularly given that they can be more complex or possibly more expensive than common forms of procurement today.

“New product offerings from utilities and suppliers will also be needed, including those that address time-coincident procurement, or products that include a broader mix of carbon-free or enabling technologies. In designing new products and services, the incentives offered to the customers providing these services should reflect the value of any grid benefits and increased resiliency that can accrue to utilities, grid operators, or other market participants.”


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