How Corporations Can Maximize the Environmental Benefits of Their Renewable Energy Purchasing
In late January 2018, two announcements offered strong confirmation of corporations’ global renewable energy leadership. On January 22, Bloomberg New Energy Finance announced that 2017 had been a record-setting year for corporate renewables procurement via power purchase agreements: an impressive 5.4 GW of contracts for clean power were signed—including 3.1 GW in North America, according to deal tracking by RMI’s Business Renewables Center (BRC). Days later, the RE100 shared that 25 of its members had already achieved their 100 percent renewable energy targets by the end of 2016. Others have joined their ranks since, including new announcements in recent weeks.
With 100 percent renewable energy starting to look like an achievable goal, many companies are asking what could be next. A common theme is increasingly thinking not only about how much renewable energy to buy, but also the impact of renewables purchases. For many of these companies, additionality is an important metric to ensure impact—the idea that new renewable capacity comes online as a result of a corporation’s investment. But is this the only criterion for thinking about impact? Do all renewables purchases have the same impact on real-world carbon emissions?
Do all renewables purchases have the same impact on real-world carbon emissions? Not necessarily.Tweet
The Impact of Avoided Emissions
The answer is not necessarily. It comes down to complex questions of renewables accounting that many buyers are tackling proactively. More specifically, the impact of new renewable energy is only as big as the dirty energy it replaces. And new renewable energy capacity doesn’t all displace generation from the same power plants. Which specific power plants’ generation is displaced by a given renewable energy project is what determines that renewable energy’s “avoided emissions.”
Avoided emissions can vary widely, largely influenced by precisely where projects are located. This is important, because when it comes to renewable energy project siting, many companies have been using proximity as a proxy for quality. The recent proliferation of wind-powered data centers in Iowa and solar-powered data centers in New Mexico are but two examples of the trend. As a GTM article noted earlier this month, some companies want to buy renewable energy in the regions where they operate or otherwise have facilities.
A geographic disconnect between a company’s operations and its renewable energy purchases is often portrayed—either explicitly or implicitly—as a bad thing. Meanwhile, colocation, or at least proximity, of renewable energy and load are often seen as de facto positive. At an intuitive level, this makes sense. Yet as corporations are well aware, the issue is far more complex. Avoided emissions analysis has found that focusing solely on proximity potentially leaves large amounts of real-world positive environmental impact on the table.
Achieving Greater Carbon Reductions at the Same Cost
For companies seeking to navigate this complex landscape and maximize the carbon-saving benefits of their renewable energy purchasing, it could be time to rethink the role of geographic targeting to achieve greater carbon reductions at the same cost. But how?
At a minimum, the impact of location on avoided emissions should now be considered alongside other corporate decision-making criteria: proximity to facilities, price, sustainability goals, additionality, and so on. More specifically, whether planning on-site installations of rooftop solar across a real estate portfolio or evaluating off-site power purchase agreement options for wind and solar projects, it is now easy for buyers to deliberately target the most carbon-intensive areas for displacing existing generation. With this information, buyers think about location differently and consider whether proximity is the best metric for impact.
This undoubtedly involves an evolution in thinking, but the opportunity for buyers is large if they do. WattTime has found that some North American solar projects displace as much as three times as much CO2 as similarly sized projects with comparable specifications in other locations. To take another example, WattTime recently shared the results of a collaboration with the Boston Green Ribbon Commission’s Higher Education working group, which includes Boston-area institutions such as Harvard University, MIT, and others. The research evaluated seven potential sites for a 3 MW off-site solar project. That’s small by Fortune 500 standards, but the findings hammer home the importance of location. One site under consideration performed 176 percent better than an otherwise equivalent baseline site when evaluated on the basis of avoided emissions.
In the wake of 2017’s global-record-setting year, 2018—for its part—is off to a strong start. Through mid-February alone, the BRC tracked 0.7 GW of new deals. Just imagine how much corporations can collective magnify their impact by voluntarily optimizing their strategic investments for avoided emissions.
WattTime is collaborating with industry partners who are looking to evaluate the impact of renewable energy projects they are pursuing. If you too would like to engage further, please contact us here.