By Orrin Cook
On a warm night in March 2020, residents in the Ndosho neighborhood of Goma, Democratic Republic of the Congo (DRC), gathered in the street in anticipation and curiosity as newly installed streetlights were about to be turned on for the first time. Skepticism over the project, which promised nighttime lighting powered by the sun, via a new 1.3 MW off-grid solar minigrid built in the community, had been prevalent over the preceding weeks. Nuru, the local Congolese solar developer, had assured residents that solar power could indeed be a reliable source of evening electricity. But even in a neighborhood in which less than one in ten residents felt safe walking at night and only 3% had access to electricity — much of which is powered by diesel generators — clean energy promises such as Nuru’s can be a hard sell.
As the streetlights were turned on, jubilant and spontaneous celebrations erupted in the streets, accompanied by comments like “Is this coming from solar?” and “Now we know this is real!”. While the promise of solar power was substantiated, the social and economic benefits in the Goma community continue to multiply. In the months since the streetlights were commissioned, nighttime safety and security have dramatically improved as demonstrated by the emergence of night markets, an engine of economic development previously not accessible. The implementation of this project was the culmination of a multi-year effort to leverage corporate renewable energy procurement to extend the benefits of renewable energy revolution to some of the most fragile and least electrified countries on the planet. However, the modest community streetlight project in Ndosho just scratches the surface of what is possible when considerations of social impact and climate equity are incorporated into corporate renewable energy procurement decisions.
The Goma streetlights were funded through the purchase by Microsoft of the first-ever Peace Renewable Energy Credits (P-RECs) from Nuru’s new 1.3MW off-grid solar mini-grid in Goma. P-RECs are Renewable Energy Certificates (RECs) that incorporate high impact social co-benefits associated with renewable energy generation from fragile, energy poor countries. P-RECs can help corporate buyers active in the voluntary markets to meet renewable energy targets and social responsibility goals. While the project is unique, Microsoft is not alone in its commitment to sourcing renewable energy. Through the RE100 campaign, over 290 corporations have now voluntarily made 100% renewable energy commitments for their global operations. These commitments total over 315,000,000 MWhs of renewable energy and represent billions of dollars of new investment to support the global clean energy transition. The emergence of these corporate renewable energy commitments can be traced back to the history of the RECs as an accounting instrument that allows the social and environmental co-benefits of specific megawatt hours (MWh) of renewable energy to be traded and claimed. While the REC instrument is incorporated into many types of renewable energy transactions, including power purchase agreements (PPAs), virtual power purchase agreements (VPPAs), green tariffs, and utility green pricing programs, its most popular form in the market is as an “unbundled” REC. In 2019, 42% of the voluntary renewable energy market in the U.S. market consisted of unbundled REC procurement, stemming largely from short-term contracts from a national REC market. This procurement method, however, is becoming less popular relative to other procurement options and often faces some criticism for its impact. It can be challenging, for example, to make an argument that “cheap” RECs from an existing 200MW wind farm in Texas or Iowa directly support the development of new renewable energy, particularly when project financing models don’t include REC revenue. This has led many corporations to look instead to PPAs, VPPAs, or green tariffs that provide clear linkages between their renewable energy spend and the development of new clean energy on the grid.
However, the context for assessing the impact of unbundled REC purchases is important. Almost 800 million people around the world lack access to electricity, 80% of whom live in sub-Saharan Africa and Asia. Unlike the U.S. and Europe, many countries in these regions lack grid infrastructure, encounter high project financing hurdles, and face logistical challenges in sourcing, delivering, constructing, and maintaining new renewable energy projects. In these locations, RECs can be used as a critical de-risking mechanism and catalytic revenue source for developers to secure project financing. What the Goma street lighting project has demonstrated is that unbundled RECs, in this case P-RECs, can play a significant role in unlocking new investment to facilitate impactful clean energy deployment. For corporate renewable energy procurement teams, it is evidence that their buying power and commitments can support extending the renewable energy revolution to some of the world most vulnerable communities.
For these types of projects to significantly scale, however, more corporations and RE100 companies could consider dedicating a portion of their procurement portfolio to projects with significant community co-benefits, creating a social impact carve-out. Signs are encouraging that corporate renewable energy markets are ready to embrace such as carve-out. For example, Salesforce, a leading corporate purchaser, recently released a white paper entitled “More than a Megawatt”, highlighting ways to maximize positive project impacts. The Renewable Energy Buyers Alliance (REBA), a membership organization of 225 energy buyers, energy providers and service providers, has linked with Groundswell, a U.S.-based developer targeting renewable energy development in frontline communities, to promote energy equity and community engagement amongst corporate renewable energy leaders. Microsoft, for its part, has dedicated a new “Climate Equity and Environmental Justice” section its annual sustainability report. These efforts suggest corporations are ready to think beyond their 100% renewable energy commitments and leverage their dollars to support high-impact procurement.
Renewable energy promotion and accounting platforms, such as RE100 and CDP, are also key to encouraging these types of projects as some embedded accounting challenges do exist. REC and renewable energy accounting frameworks, the rules by which corporations can make renewable energy usage claims, were designed to support procurement from grid-connected systems. However, electricity market realities encountered in many of the world’s least electrified countries are markedly different than in developed markets, with centralized electricity grids often not reliable or present and decentralized, off-grid solutions providing a viable path forward. Through special recognition efforts, flexibility mechanisms, or revisions to existing protocols, these accounting and commitment platforms can help to provide corporations with added incentives to incorporate social impact considerations into their procurement decisions.
In many markets, corporations are playing a transformative role in supporting policy changes, new procurement models, and stimulating local electricity market development. In Taiwan, as a direct result of Apple’s supply chain renewable energy commitments, a key supplier, TSMC, executed in 2020 the largest corporate PPA to date, a 920 MW offshore wind deal in Taiwan. Walmart, Google, Microsoft, and many others have also started to engage with their global supply chain on carbon reductions and renewable energy procurement. The scale of these efforts is quite large, with implications for electricity markets in nearly all countries. Integrating off-grid, energy access, and high-impact procurement into operational or supply chain commitments can help global corporations demonstrate a commitment to climate equity and stimulate investments in communities for whom the introduction of renewable energy can be transformative.
As Energy Peace Partners has witnessed in Goma, corporate renewable energy procurement can have an outsized social and economic impact. And while sub-Saharan Africa and Asia have particularly acute energy access needs, there are plenty of opportunities to identify and develop high-impact renewable energy projects that bring meaningful social benefits, relative to the corporate spend, to communities in need. Microsoft’s purchase of the first P-RECs has helped to expand the boundaries of how we think about corporate procurement and impact. This conversation is long overdue. We have already seen promising actions taken by other corporate leaders. The key will be building consensus beyond the handful of corporate leaders and first followers to move impactful procurement from stand alone to standard practice in the sector.
Photo Credit: Nuru
This piece was originally published on Medium.