Companies become more informed and selective regarding renewable energy procurement. Today’s sustainability leaders are increasingly guided by transparency and impact, rather than simply opting for convenience.
However, many companies still struggle to analyse the risks and costs associated with purchasing ‘unbundled’ Energy Attribute Certificates (EACs) to offset a brown tariff, or deciding whether to trust their supplier to provide a reliable solution.
Renewable energy routes to market: Compare your options
For companies seeking to procure renewable electricity, there are several options available, each with different levels of complexity, risk, and sustainability impact. They are briefly summarised as follows:
Green Tariff (Bundled EACs) - A physical electricity contract that includes a specified volume of EACs, together representing a ‘Green’ electricity supply for consumers.
Unbundled EACs - EACs with no associated physical electricity that can be bought on the open market from various generation facilities.
Onsite PPA - Energy generation built at or near the location where the electricity will be consumed, for example, rooftop solar.
Offsite PPA - Energy generation built at a different location from where the electricity will be consumed. The electricity and EACs generated are sold to the buyer via a long-term contract.
Below, we outline the key attributes of each solution to help sustainability and procurement teams make informed decisions when offsetting their emissions:
Contract length | Buyer category | Complexity | Financial risk | Capital and operating expenditure required | Compliant with CDP, RE100, SBTi | Reputational risk (Greenwashing) | Additionality claim | |
|---|---|---|---|---|---|---|---|---|
Green tariff (Bundled EACs) | Short term, 1-3 years | SME & I&C | Low | Low | No | Yes, but requires verification | High | No |
Unbundled EACs | Short term, 1-3 years | SME & I&C | Low | Low | No | Yes | Medium, depending on whether EACs are traceable / hourly matched | No |
Onsite PPA | Long term commitment, up to 25 years | SME & I&C | High | High | No, but significant financial commitment required | Yes | Low | Yes |
Offsite PPA | Minimum term typically 10 years | Typically I&C only | High | High | No, but significant financial commitment required | Yes | Low | Yes if PPA underpins financing of new build facility |
Table 1. Renewable energy routes to market. High level risk matrix
'Green' tariffs
Green tariffs offer more flexibility than Power Purchase Agreements. Companies can easily switch between tariffs without long-term commitments, selecting from a variety of pricing and green energy approaches to meet sustainability goals.
However, the authenticity of these 'green' approaches can vary. Green tariffs are supported by Energy Attribute Certificates (EACs)—one EAC per MWh of renewable energy generated. For instance, a tariff claiming 100% renewable electricity must be backed by the corresponding number of renewable EACs for the total electricity supplied.
Yet, the reality of green tariffs is that it can be challenging for buyers to truly understand the origin of the certificates prior to signing the contract. Some suppliers will procure large volumes of certificates from renewable projects that may be very old or may have received a government subsidy.
This may not be aligned with a buyer's sustainability goals, if they for example would like to demonstrate that their purchase has in some way supported a developer that has brought assets to the grid more recently and without government support. Buyers may want to support developers that are close in proximity to their demand meters, to demonstrate that they support the efforts of local renewable generators.
Another growing demand from corporate buyers is the wish to demonstrate 24/7 hourly matching. – Paul Hill, Head of Energy Markets @ Renewabl
This in practice requires energy users to prove that every unit of energy they consume can be matched with a corresponding unit of carbon free energy, for every hour of every day. Due to the lack of transparency and limited buying options, this is not possible through the vast majority of standard green tariffs. However hourly matching platforms are helping buyers to facilitate hourly matched purchases of unbundled EACs, allowing buyers to optimise their EAC inventories and meet these goals.
Bundled tariffs vs buying unbundles EACs
It is also possible for buyers themselves to procure unbundled EACs. Buyers therefore have the option to contract their energy supply contract and pair it with the requisite amount and the preferred quality of unbundled EACs to create their own green tariff. There are a few reasons why this approach might result in a positive economic outcome compared to supplier green tariffs:
Transparency, traceability, control - Buying unbundled EACs would enable the buyer to have a greater transparency in the process. Buyers can select the preferred technology type (e.g. solar, wind) and other important factors such as the age and the location of the generating project. The buyer would have more control over the EACs they receive to ensure alignment with any sustainability targets or pre-requisites.
Competitive tension - A clear benefit of this approach would be the buyers’ ability to source and procure the cheapest electricity contract and the cheapest EACs (GOs or REGOs) through a competitive process such as undertaking a market tender for each component. Simply asking your energy supplier, or a handful of energy suppliers for a bundled green energy tariff is unlikely to be the most economic approach as it lacks the competitive tension.
Availability - Not all suppliers offer green tariffs. Buying unbundled will enable all electricity contract offers to be compared i.e. from a much larger pool of suppliers, increasing competition and ensuring low price offers are not overlooked. The same applies to EACs, not all generators are suppliers. Buying unbundled would increase the pool of potential sellers to include generators and suppliers.
Timing - The electricity market is very volatile, typically buyers will monitor markets and buy opportunistically, when market prices are at their lowest, in order to achieve the lowest price possible. The same can be said of the EAC market, buying EACs unbundled will also allow you to optimise procurement timing to ensure you are entering the market when prices are most favourable.
Ease of transacting - EAC markets are liquid and can serve buyers of all sizes, as opposed to PPAs which are only available to buyers with very large electricity demands.
Conclusions: Procuring unbundles clean energy certificates vs green tariffs
Very few suppliers today can offer a truly green tariff, whereby they can prove from where, what technology the renewable energy certificates come from and when it was generated.
There are quite a few benefits for renewable energy users to start managing the procurement of renewable energy certificates: economic, sustainability and accounting benefits.
The case study exercise reflects green tariffs in the UK, but it has become evident that in Europe, within the AIB mechanism, it becomes even more complex to accurately trace the origin of certificates that come behind a green tariff.
There are initiatives today that seek to provide reliability and traceability to the renewable energy certificate system. At Renewabl, our aim is to empower the consumer to search for and transact renewable certificates that meet their desired sustainability objectives.
Over and above this, via the Renewabl marketplace, buyers have the option to procure hourly stamped renewable energy certificates, matching their energy consumption hourly, directly to a large pool of renewable generators.
Policy wise, for scope 2 and 3, the direction of travel suggests that consumers will have to be able to trace certificates back to the source and to the time that they were generated. Hourly matching objectives will not achievable procuring the vast majority of green tariffs.