May 23, 2023
As the global corporate community actively works to decarbonize, companies are increasingly working to cause new renewable energy to mitigate their Scope 2 emissions. At present, however, Energy Attribute Certificates (EACs) – which include American Renewable Energy Certificates (RECs) and European Guarantees of Origin (GOs) – fail to accurately reflect the very high value buyers place on the method of their production. Because no system differentiates between renewable energy procured from long-existing projects and that which is newly developed due to the procuring company (e.g., via a Power Purchase Agreement (PPA)), outside critics often lump critical renewable energy development work with reputationally risky “unbundled” EAC procurement. Companies, particularly those without energy procurement teams or geographically concentrated energy demand, lack a strong market signal to validate their pursuit of the long and often complex pathway towards enabling new capacity and risk facing criticism for greenwashing.
To address this gap, Sustainability Roundtable, Inc. (SR Inc) is working with key relevant industry players including leaders at CEBA, CEBI, and the EPA’s Green Power Partnership as well as top leaders from the growing climate tech sector to explore how best to establish a “Purchaser Caused” (PC) tag, which will certify EACs as having enabled new grid capacity. This tag creates a premium on “PC” EACs created by more involved contracting processes (i.e. on-site installations, PPAs, and VPPAs), causing appropriate recognition for the impactful efforts of those who already pursue the development of new capacity. Solely supporting existing renewable energy projects often allows companies to avoid real climate action and support the status quo. Because creating new renewable capacity is simultaneously more effective at combating climate change (by decarbonizing grids), more difficult (long, drawn-out contracting processes), and more risky (requires longer and more involved commitments), it is critical to place a premium on it in the market. By doing so, the industry can acknowledge and affirm the overriding desire by most companies to cause new capacity, the primary driver behind 60 new GW of contracted capacity supported by CEBA. This proposal also supports industry moves to promote ambitious action, such as CDP’s move to include questions which provide credit to companies causing this new capacity or the WRI’s ongoing update of the GHG Protocol (reviewed in a forthcoming thought leadership release).
For a Purchaser Caused tag to be effective, third-party verified criteria must be developed to verify buyers’ enablement of specific projects. Fortunately, renewable energy developers have a well-known and deep consensus regarding what is required to cause the financing of new renewable energy capacity. Fundamentally, this label only requires that the procuring corporate has sufficiently strong or posted credit to make a long-term commitment to a significant portion of a project to support its financing. This could be translated into a certifiable criterium that in its simplest form asks three key questions:
When a respected third-party certifier can determine each of these criteria are met with a “yes,” the EAC would be designated as a “Purchaser Caused EAC.”
The tag supports corporations in maximizing the impact of their efforts, credit ratings, and finances towards the most meaningful projects by giving them explicit recognition in the market, dramatically increasing the power of corporate renewable energy procurement to mitigate emissions while avoiding reputational risk. This initiative is not intended to denigrate “unbundled” EACs acquired from long-existing projects, as those will remain key for companies without the scale and/or credit to pursue new capacity development at present. Instead, it serves as a complement to the efforts to move towards more impactful energy certificates, such as time-based hourly EACs or EACs with scored emissions impacts. “PC” EACs will ultimately focus, multiply, and drive corporate off-takers’ interest in helping to cause the development of new renewable energy capacity – the necessary action to accelerate the adoption of clean energy at scale and significantly advance progress towards global climate goals.
