Welcome to the first article in our five-part series exploring how procurement departments can drive their organisations toward net zero targets. Over the coming weeks, we'll dive deep into the five key levers you can use to reduce carbon emissions: electricity, transport, manufacturing, agriculture, and buildings. By the end of this series, you'll have a comprehensive toolkit for transforming your procurement strategy into a powerful force for climate action.
In this first article, we'll focus on one of your most powerful tools: electricity sourcing and how you can transform your electricity procurement strategy while maintaining cost efficiency and reliability.
The Shifting Landscape of Electricity Sourcing
If you've been in procurement for a while, you've witnessed a remarkable transformation in the electricity sector. Remember when renewable energy was considered an expensive luxury? Those days are gone. Today, you can source solar power at 33% less than natural gas – a dramatic shift from 1979 when it was 50 times more expensive than fossil fuels.
This evolution brings you unprecedented opportunities. By strategically sourcing renewable electricity, you can help your organisation cut emissions while potentially saving money – and in some cases, even generate new revenue by selling energy back to the grid. Plus, you'll reduce your company's dependency on petrostate suppliers, giving you more control over your energy security and costs.
Understanding Additionality: Your Key to Meaningful Impact
Before you dive into renewable electricity procurement, you need to understand additionality. Think of it this way: when your purchasing decisions directly result in new renewable energy generation being added to the grid, that's additionality. Without your organisation's involvement, these clean energy projects wouldn't exist. If you want to avoid greenwashing accusations and ensure your efforts create genuine impact, additionality should be at the top of your checklist.
Procurement Methods: Your Options on the Table
Let's look at the main procurement methods available to you and how each could fit your strategy:
1. Self-Generation
You could invest in your own renewable energy infrastructure, like on-site solar panels or wind turbines. If you're looking for high visibility and want to control your energy future, this might be your path. But be prepared: you'll need significant capital investment and patience with planning requirements. The upside? You'll create clear additionality and might find yourself with a compelling sustainability story to tell.
2. Power Purchase Agreements (PPAs)
As a procurement professional, PPAs could become your most powerful tool. These long-term contracts with renewable energy providers offer you:
Substantial environmental impact with clear additionality,
Potential cost savings through fixed energy prices,
The ability to scale as your consumption grows.
But before you jump in, consider:
You'll need to assess the financial risks of long-term commitments,
Expect negotiations to take 6+ months,
You'll want specialised expertise to navigate complex contract structures.
3. Environmental Attribute Certificates (EACs)
If you're looking for a simpler approach, you might consider EACs. They are also called RECs (Renewable Energy Certificates) in the US and GoOs (Guarantees of origin) in the EU. While they're easier to purchase and carry lower risk, be aware of the trade-offs:
You won't create much additionality,
You'll face ongoing costs without potential financial upside,
Your stakeholders might question their credibility compared to other options.
4. Grid Mix Claims
While it might be tempting to simply claim the renewable portion of your standard grid mix, think twice. Unless you're in a region where you genuinely can't access other options, this approach probably won't help you meet your renewable electricity goals credibly.
Best Practices
Here's how you can maximise your impact while managing risks:
Build a mixed portfolio: don't put all your eggs in one basket. You might want to secure a PPA for your baseload consumption while using EACs to cover the rest.
Make additionality your priority: when evaluating options, ask yourself: "Will my purchase help create new renewable energy capacity?" This question will guide you toward more impactful decisions.
Look beyond just power: remember to factor in the supporting technologies you'll need:
Battery storage systems,
Transmission line upgrades,
Smart grid technologies.
Build strong partnerships: develop relationships with renewable energy providers who can grow with you and support your long-term goals.
Stay informed: keep your eye on:
Emerging technologies like nuclear fusion,
Changes in renewable energy costs,
New storage solutions,
Grid infrastructure improvements.
As a procurement professional, you're not just buying electricity – you're shaping your organisation's future. Your decisions about electricity sourcing can deliver multiple wins: reduced emissions, stable costs, enhanced energy security, and a stronger corporate reputation.
The renewable electricity market is maturing rapidly, and your expertise in this area will become increasingly valuable. You're no longer asking whether to transition to renewable electricity, but how to do it most effectively for your organisation.
Remember: every time you make an electricity sourcing decision, you have the power to advance your organisation's net zero journey while potentially creating significant business value.
Need help developing your sustainable procurement initiatives? Our team of experts is here to support you. Contact us at info@beeaware-consulting.com or through our contact form, and let's discuss how we can help you achieve your sustainability goals.
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