The updates establish new parameters for corporate renewable electricity procurement, potentially impacting your renewable energy strategy. In this article, we delve into these changes and their anticipated implications.
Setting the bar for renewable energy ambition
Launched in 2014, RE100 is a global climate action initiative, set up by CDP and Climate Group, whose 400+ influential members across the commercial and industrial sectors commit to sourcing 100% of their electricity from renewable sources by 2040 at the latest.
In a bid to increase ambition, RE100 has recently revised its guidance on corporate renewable electricity procurement. According to the latest updates to the technical criteria, which 'define what counts as renewable electricity for the purpose of participation in the RE100 campaign', as of 1 January 2024, members will need to observe a 15-year date limit on commissioning or repowering when purchasing renewable electricity to cover 85% of their total annual electricity demand. Therefore, this change will stimulate the construction of new and additional renewable capacity by directly increasing members' demand for new projects.
Unbundled EACs and the impact on hydropower procurement
The majority of the volume (39%) of renewable electricity procured by RE100 members in 2021 was delivered through unbundled energy attribute certificates (EACs). Unbundled EACs are an accounting instrument that reliably tracks megawatt-hours of renewable electricity from the point of origin to the final consumer. They are traded separately from the underlying electricity and are considered to be the easiest measure a company can implement to reduce the emissions derived from the electricity they purchase.
The new regulations will particularly impact the purchase of unbundled EACs from hydropower plants, which are regarded as the industry benchmark, due to their operational history exceeding 15 years. Notably, Norway, Europe's primary unbundled EAC supplier, derives around 45% of its electricity from hydropower. However, the changes will also reverberate across hydropower nations like Austria and Switzerland, the USA, Brazil and China. As a consequence, market experts expect increased demand for “newer" technologies such as wind and solar, fostering bullish unbundled EAC markets in certain regions.
Next steps: hedging against procurement risks
Given this scenario, both RE100 members and non-members can potentially benefit from engaging in multi-year unbundled EAC forward contracts. These contracts act as hedging instruments which allow companies to secure volumes and prices for the next three to five years today but disburse money only after delivery of the unbundled EACs in the respective years. Engaging in such agreements empowers companies to mitigate the risk of higher future prices for technologies like wind and solar, which will be in higher demand from RE100 members in the future.
How can South Pole help?
There are many reasons why you should not wait on renewable energy. With global experience and explicit regional knowledge of electricity markets, our experts enable tailored consulting and solutions to help companies around the world achieve their renewable energy goals.
If you would like to know how multi-year unbundled EAC forward contracts can help you achieve your climate action goals in the most cost-efficient way, we invite you to contact our renewable energy experts.