October 26, 2021
Why VPPAs and VPPA2.0?
As a growing number of sustainability leaders know, off-site renewable energy regularly provides the vast bulk of a company’s emission reductions. This is true whether that is done through:
(a) increasingly expensive “unbundled” Renewable Energy Certificates (RECs) often from long existing renewable projects, or
(b) “purchaser caused” RECs resulting from new renewable energy projects companies help cause through making a long-term commitment to a price for those resulting RECs.
For companies large enough to procure purchaser caused RECs, unbundled RECs carry reputational risks when presented as helping a company move to 100% renewable energy (since most do not actually “cause” any new renewable energy). All SR Inc Member-Clients with sufficient demand strongly prefer purchaser caused RECs because they are more credible and are now increasing more economically attractive than unbundled RECs. Consequently, SR Inc has long been leading in the Virtual Power Purchase Agreement (VPPA) market and has innovated to help Member-Clients become leaders in buyer aggregated VPPAs (the “VPPA2.0”). The VPPA2.0 enables companies with investment grade credit and an aggregate U.S. & Canada electricity demand of at least ~20,000 MWh to aggregate their procurement to cause new renewable energy at utility scale. This scale drives the most favorable pricing structure and contractual protections risk-averse companies require. All SR Inc Member-Clients who have contracted a VPPA are using the resulting purchaser caused RECs to mitigate their electricity emissions of both their owned and leased real estate in both regulated and deregulated markets in the US.
Whether working with fellow SR Inc Member-Clients in the Net Zero Consortium for Buyers (NZCB) or with independent buyer advisory services, all sophisticated SR Inc Member-Clients are interested in the VPPA market as they chart paths to Net Zero Emissions globally. Every quarter since 2019, SR Inc has therefore been pleased to offer the NZCB VPPA Opportunity Index that enables a comparison of potential wind and solar VPPA performance across U.S. hubs using common analytics. The Index reflects both prior (backcast) performance and forward pricing. The Opportunity Index has been based on proprietary SR Inc analytics and key data sources including those provided by SR Inc partners LevelTen Energy and REsurety.
Key findings from our Q3 analysis include:
The NZCB VPPA Opportunity Index is a relatively elementary rendering of complex markets, but NZCB participants find it helpful in beginning to gain an understanding of VPPA market dynamics and financial implications for implementing their renewable energy strategies through aggregated VPPAs. In pursuing any specific VPPA opportunities, NZCB participants require very detailed and custom analytics performed with senior expert assistance before transacting. This assistance requires financial, legal, and market expertise to drive timely procurement strategy development and implementation, transaction structuring, contracting, and negotiation services through a successful and auditable corporate procurement process.
Methodology
Data Sources
If you have any additional questions, or would like to learn more about the NZCB, contact info@sustainround.com.
David Osborn is an accomplished corporate sustainability advisor serving dozens of SR Inc’s Fortune 500 and mid-sized client companies as they drive significant operational efficiencies and better align with talent, customers, investors, and regulators through corporate sustainability strategy. From his career in business consulting and executive leadership, David brings to SR Inc over 20 years of experience in building professional services and technology-driven businesses serving a broad range of client industries. David is a graduate of Dartmouth College and Northwestern’s Kellogg Graduate School of Management. After receiving his MBA, David cut his teeth at Bain & Company in their Boston office and then progressed up to Managing Partner at Booz, Allen & Hamilton (BAH) where he was ultimately elected by his Partners to head their Australasian business. David next returned to the US to head BAH’s Retail Financial Services practice in North America and then transitioned to serve as Managing Partner / EVP at two innovative business service companies at BAH. David then joined SR Inc as Chief Operating Officer in 2010.
As Director of Research & Consulting at SR Inc, Jeff Meltzer provides outsourced program assistance to clients on a one-to-one basis, helping CSR, operations, and sustainability executives set goals, drive progress, and report the results of their sustainability programs. Jeff holds a Master of Environmental Management from Duke University’s Nicholas School of the Environment and a B.A. in Environmental Policy from Colby College. Before SR Inc, he had relevant work experience with the Procurement and Property Services team at Citizens Bank as an EDF Climate Corps Fellow, with the EHS and Sustainability team at L’Oréal, and with the EPA Green Power Partnership as an Environmental Analyst at Eastern Research Group. He also advised Biogen in helping develop a Scope 3 supplier engagement strategy to achieve its ambitious Science-Based Target. Jeff is also an active participant in sustainability groups, is an accredited LEED Green Associate, is trained in the GRI Standards and GHG Protocol, was the Co-President of the Duke’s Net Impact club, and most recently was a member of the leadership team of Net Impact Boston.
