By Doug Miller
Renewable energy markets, fueled by voluntary procurement, represent a multi-billion dollar lever to accelerate global power sector decarbonization.
These markets are evolving quickly as companies evaluate how they can make more targeted, differentiated impacts through their renewable energy procurement decisions. For example, since the beginning of June, the Clean Energy Buyers Institute (CEBI) issued new Principles for Purpose-Driven Energy Procurement and Sustainability Roundtable’s introduced a new initiative to cultivate a standardized “purchaser-caused” label on energy attribute certificates (EACs). CEBI also recently defined the top next generation solutions that buyers seek, ranging from solutions that optimize for avoided emissions to those that help decarbonize global value chain electricity use and deliver verifiable social and community benefits.
Photo credit: International Organisation for Migration. Solar project at Malakal Teaching Hospital, South Sudan
Buyers increasingly want solutions that help them maximize the grid decarbonization and positive human impact for every megawatt–hour of renewable energy they procure globally.
Developments like these offer a glimpse into the growing demand among corporate renewable energy buyers to achieve more targeted and differentiated environmental and social impact through procurement. In other words, buyers increasingly want solutions that help them maximize the grid decarbonization and positive human impact for every megawatt–hour of renewable energy they procure globally.
Luckily, the menu of procurement options available to buyers is already beginning to provide new solutions that help them reach their goals. Energy Peace Partners (EPP)—a nonprofit that leverages innovative climate and finance solutions to promote renewable energy access as a building block for peace and resilience in the world's most fragile regions—developed the novel “Peace Renewable Energy Certificate” (P-REC) to provide buyers a procurement solution offering purpose-driven principles and next generation impact.
The P-REC is a quality label affixed to qualifying EACs from high impact renewable energy projects in fragile, energy poor countries. P-RECs deliver critical additional revenue that allows developers to partially finance new renewable energy generation assets and/or fund projects with shared community benefits like public street lighting and hospital solar electrification.
The P-REC isn’t just a theoretical solution. The first examples of P-REC purchases include:
Microsoft’s first and second transactions in Goma, Democratic Republic of Congo (DRC);
Google’s transaction in Garamba, DRC;
Block’s first and second transactions in Malakal, South Sudan.
These purchases expanded renewable energy access in communities in the DRC and South Sudan. They also generated additional local benefits, such as improved safety and security, increased livelihood opportunities, and improved public health services.
Photo credit: African Parks
The imminent launch of the P-REC Aggregation Facility (PAF), developed by EPP and Camco, will support the scaling up of the global P-REC market, while catalyzing up to USD 90M of new renewable energy capacity in 11 fragile states in sub-Saharan Africa, connecting 2.5 million people to electricity and avoiding 3.4 million metric tonnes of carbon emissions.
Renewable energy buyers, investors, developers, and advisory firms alike have an opportunity to participate in the emerging P-REC market to empower communities to leapfrog over diesel, coal, and charcoal, while contributing to greater peace and resilience:
For buyers, P-RECs represent a new renewable energy procurement option to make progress toward their goals and demonstrate leadership for purpose-driven, next generation impact;
For developers, P-RECs represent a new revenue stream that supports transformative first-time renewable electrification projects in some of the hardest-to-reach markets.
For environmental market advisory firms, P-RECs represent a new procurement option they can offer their clients to stay ahead of market evolutions and expand their services in order to better help buyers achieve their goals.
The table below summarizes how P-RECs align with purpose-driven, next generation impact goals for procurement that buyers as well as investors are setting:
Table 1: Overview of P-REC Alignment with Purpose-Driven, Next Generation Renewable Energy Procurement
|
Impact Priority |
Rationale |
Value of P-RECs for Buyers |
|
Purpose-driven procurement |
A growing number of buyers, such as those participating in the CEBI’s Beyond the Megawatt initiative, want to support renewable energy projects that deliver verifiable and measurable benefits to local communities |
P-RECs support renewable energy projects in countries that are fragile, climate vulnerable, and energy poor, creating (carbon-free) electricity access, facilitating investments in new renewable energy projects, and delivering co-benefits that provide the building blocks for greater peace and resilience |
|
Corporate value chain decarbonization |
A growing number of buyers, such as those engaged in CRS’s Clean Energy Accounting Project and Clean Energy Buyers Association’s Supply Chain Program, want solutions to procure renewable energy on behalf of their respective upstream suppliers’ and downstream customers’ electricity use |
P-RECs provide a solution to cover the electricity use associated with global value chains, where buyers can procure P-RECs in the countries that overlap with their upstream suppliers and/or downstream users based on value chain partners’ measured or estimated electricity use |
|
Avoided emissions optimization |
A growing number of buyers, such as those participating in the Emissions First Partnership, want to prioritize clean energy procurement that is optimized for locations globally with maximum decarbonization impact irrespective of grid or market boundaries |
P-RECs enable communities to reduce or leapfrog over reliance on diesel, coal, and charcoal, delivering significant avoided emissions potential to buyers |
|
Purchaser-enabled procurement |
A growing number of buyers, such as those participating in Sustainability Roundtable’s Purchaser-Caused EAC Tag working group, want a label affixed to the canceled EACs that are issued from a renewable energy project that provides documented evidence indicating support at the pre-financing stage so they can make a differentiated and verified claim about their support for enabling that specific project |
P-RECs enable buyers to provide catalytic funding for new distributed mini-grids and/or community projects like street lighting or hospital solar electrification, where all P-RECs provide proof of buyers’ financial support |
|
Climate-related disclosure regulation management |
A growing number of buyers are taking action to reduce their emissions in response to the emergence of new carbon-related disclosure regulations in the European Union, such as Corporate Sustainability Due Diligence Directive (CSDDD) and Corporate Sustainability Reporting Directive (CSRD) and pending regulations in the United States, namely the U.S. Securities & Exchange Commission’s pending rule on Climate-Related Disclosures |
P-RECs offer a market instrument that verifies that a given buyer procured a carbon-free megawatt-hour along with verifiable community benefits that can be applied to emission reduction and social impact claims in disclosures about its direct operations and/or global value chains |
There are other dimensions of P-RECs that may advance buyer as well as investor priorities, such as advancing innovative climate financing solutions, and supporting renewable energy investments based on geopolitical considerations. P-RECs may also offer a compelling new solution for companies and investors that prioritize social impacts, where the decarbonization and climate benefits of renewable energy projects enabled by P-RECs are the secondary benefits.
This summer, EPP is conducting stakeholder research through semi-structured interviews and workshops among buyers, investors, developers, and advisory firms.
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