By James F. Boyle, CEO & Chairman of Sustainability Roundtable, Inc., and Sarah Lehan, Senior Associate at Sustainability Roundtable, Inc.
A fierce debate between different approaches to procuring off-site renewable energy has raged on the op-ed pages of Latitude Media — and it has missed what counts.
McCormick, Richardson, and Bronski’s Latitude-published reply to the Financial Times’ dubious August article, “Big Tech’s Bid to Rewrite the Rules on Net Zero,” correctly counters the latter’s primary error: its gross misunderstanding of the debate between a 24/7 carbon-free energy (“24/7 CFE”) and an emissions-first (“Emissionality”) approach to renewable energy procurement. Based on more than 15 years of advising over 100 Fortune 500 and global growth companies on their clean energy strategies, we believe we need both approaches. Still, over 95% of companies can abate more carbon through Emissionality. Their electricity loads are too dispersed and modest for a 24/7 CFE local procurement strategy to effect timely change.
More pressingly, both op-eds overlook a foundational point. They neglect to clarify how an offsite renewable energy procurement can be assured to cause new renewable energy capacity. Clean energy buyers who assume (and communicate) that their Energy Attribute Certificates (EACs) cause new renewable energy do so at their peril. Offsite corporate clean energy procurement typically causes new capacity only if it prioritizes causation first—before 24/7 CFE or Emissionality.
Princeton research published this January in Joule, on which Financial Times’ August article heavily relies, argues that only 24/7 CFE procurements reduce system-level emissions. This assertion ignores crucial market variation: different procurement processes create distinguishable EAC categories, across both 24/7 CFE and Emissionality approaches.
What are EACs? Required for any corporate clean energy procurement, EACs function as a “birth certificate” for a Megawatt hour (MWh) of renewable generated electricity. Companies must purchase and retire these certificates to claim clean energy usage, whether atop their roofs or across the country.
Not all EAC procurements are equal. Most do not cause new renewables. Some do. It depends on the procurement process.
Claiming “emissions-first procurement does not cause new renewable energy” without distinguishing between EAC procurement processes is like claiming “waterfowl do not mate for life” without distinguishing between ducks, harlequins, and swans.
If that analogy sounds too cute, bear with us – it helps to illustrate distinct categories the industry conflates.
Ducks, which mate seasonally, are very prevalent and not entirely respectable. So are Unbundled Renewable Energy Certificates (RECs). The convenience that draws enterprises to the spot market also eviscerates their credibility. Why? Unbundled RECs regularly come from projects developed years prior to procurement, which contribute zero to developing new renewable energy projects.
This disconnect carries reputational risk. Enterprises that purchase Unbundled RECs, keep dirty power contracts, and claim “100% renewable energy” edge towards prevarication. Fortunately, Princeton Zero exposed Unbundled RECs as the dubious “ducks” they are. Unfortunately, they generalize too hastily. While Unbundled RECs constitute the majority of North America’s EAC market – enough to overwhelm an undifferentiated dataset – the market includes other EAC procurement types with greater impact.
Harlequins exhibit more commitment than most ducks. A pair may reunite for consecutive winter nesting seasons but without anything approaching life dedication. Here, harlequins equate to “Contributing RECs.” These EACs contribute modestly (a leading vendor claims 10%) to the financing of a clean energy project primarily caused by others.
More impactful (and more expensive) than Unbundled RECs, Contributing RECs still stand far from proximately causing new renewable energy. Vendors who market them as “additional” threaten the EAC market’s credibility even more than the obviously insufficient Unbundled RECs whose replacement they promote.
Princeton’s research correctly recognizes corporate clean energy procurement has not officially defined “additionality,” a term borrowed from the carbon offset market. But responsible, experienced market participants are clear: they understand “additional” to mean causing a new renewable energy project, not “adding” incremental capital to it. Companies manipulating that association by marketing non-causative RECs as “additional” undermine EAC market credibility. That obfuscation threatens to besmirch corporate renewable energy procurement like in the carbon offset market.
Elegant in style and appearance, swans mate for life. Their constancy (and poetic fame) analogizes well to what billion-dollar global brands seek: procurements that proximately cause new renewable energy projects. They want Purchaser-Caused EACs (PC EACs).
Informed observers understand what causing new renewable energy capacity entails. Our team has worked with hundreds of clean energy buyers, lawyers, and financiers over many years. Everyone agrees that offsite procurements that meet three conditions cause new renewable energy projects.
The time has come to reify this broad, deep, and unequivocal industry consensus. The three conditions are:
1. Bundled prefinancing commitment: Procurements that contract to cover the cost of a clean energy project’s development AND its resulting EACs.
2. Sufficient duration: Procurements that commit to a term of ten or more years.
3. Sufficient volume: Procurements that commit to 40 MW or more of capacity (alone or with others’ identical, simultaneous contracts).
This test, the basis of what we term the Declaration of Purchaser-Caused EACs, enables researchers, policymakers, and clean energy buyers to identify EACs indisputably caused by their purchaser’s procurement. Based on easily discoverable public information, this test can especially benefit individuals new to the burgeoning global procurement market.
By aligning their transactions with this Declaration, enterprises can easily and credibly claim the procurement and retirement of PC EAC, with or without an additional certification. This Declaration doesn’t preclude the possibility that a shorter term and lower volume can cause new renewable energy projects; they can. Rather, it establishes the threshold beyond which most or all market participants will concede a transaction likely causes a truly additional renewable project.
The scale of corporate sustainability’s offsite clean energy procurement means that the ability to differentiate PC EACs, Contributing RECs, and Unbundled RECs carries enormous weight for our climate future. COP28’s UAE Consensus proclaims tripling global renewable energy deployment by 2030 essential to minimize climate catastrophe. Establishing PC EACs as clean energy procurement’s universally acknowledged gold standard will make that goal more obtainable.
Enough with ducks and harlequins. We must center the swan.
Jim Boyle is CEO & Founder of Sustainability Roundtable, Inc. Since 2008, Jim has helped over 100 Fortune 500 and global growth companies pursue more sustainable high performance. At SR Inc, he created the Sustainable Business & Enterprise Roundtable strategic advisory & support service and the Net Zero Consortium for Buyers, North America & Europe’s leading platform for corporate aggregated procurement of utility scale clean energy & storage. Jim also co-founded and incorporated the nonprofit Alliance for Business Leadership.
Sarah Lehan is Senior Associate of Program & Marketing at Sustainability Roundtable, Inc. Sarah defines and promotes Member Executives’ decarbonization best practices through case studies, newsletters, industry articles, and op-eds. Before SR Inc, Sarah ghostwrote op-eds and pitched journalists across clean energy and climate tech topics at FischTank PR and advanced shared-cost, best-practice research at Gartner.