RE-Source 2023 Recap
With RE-Source 2023 wrapped up for another year, we’re inspired and energized on our mission to accelerate the corporate renewable energy transition. In this article, we cover some key takeaway from the event and alongside recommendations from our expert team.
Key Takeaways
- Corporate demand: continues to grow and PPAs are an increasingly popular transition mechanism for companies in Europe. Generally, complexities of corporate PPAs are now better understood, meaning internal stakeholders are better prepared, resources allocated and supporting parties enlisted; all of which play a key role in concluding a successful process in a competitive market.
- Technology considerations: The capacity of renewable energy has scaled up significantly and will continue to do so to 2030; however solar more quickly than wind. The resultant intra-day and seasonal volatility will need to be balanced by a diversified technology mix and storage capacity in order to reach a carbon-free energy system.
- Regulatory considerations: Alongside changes to the RE100 guidelines, incoming EU and member-state specific legislation, the GHG protocol is also under review; making credible offtake criteria more stringent for corporates transitioning to renewables.
Corporate Demand
The trajectory of corporate PPAs has been on the up for several years now and demand is outstripping supply. With no abatement expected anytime soon, it is a competitive landscape to navigate. Corporates should approach the market with a good understanding of the process required to secure a fitting PPA. Whilst there is a growing ecosystem of specialist advisories and supporting parties to handhold throughout the process, it helps to have a team with an aligned understanding of the path ahead that is engaging key stakeholders within the organization from an early stage.
From the start, internal alignment is crucial, involving relevant stakeholders to ensure a common understanding on what a PPA will mean for the company. Importantly, understanding that different PPA structures come with different implications; for example, if cross border PPAs are interesting, what analytics need to be employed to quantify the basis risk? Can the organization take on IFRS accounting implications? How to map scenarios of fluctuating electricity demand? With a growing ecosystem of supporting parties able to advise on such topics, and understanding their capacity to consult on these complexities is key.
Before approaching the seller market, taking the time to define and structure a clear and targeted RFP will deliver a wider selection of offers; sellers are more inclined to respond to concrete requests, especially as there are no shortage of offtakers. At negotiation stage, an experienced legal support will ensure that the process runs efficiently; a delayed or stop-start approach at this critical phase can compromise the entire process, particularly in the face of a rapidly evolving and increasingly competitive market.
Book time to learn more about our unique approach to PPA Transaction Advisory.
Technology Considerations
The EU REDIII directive targets 42.5% of total EU power to come from renewables by 2030 (1). This requires a significant scale up in renewable energy capacity, and with solar being quicker and cheaper to deploy, it remains the dominant renewable energy technology. The challenge being, that it has a marked daily and seasonal production pattern with large intra-day price fluctuations. To balance fluctuations in production and demand, conventional (fossil fuel) energy remains a means of supporting the energy system when renewable sources are not generating. Hence, claiming 100% renewable offtake does not necessarily mean that the energy is 100% carbon-free.
The 24/7 carbon-free-energy (CFE) Compact is increasingly seen as the gold standard for credible corporate renewable energy offtake. 24/7 CFE means that every kilowatt-hour of electricity consumption is met with carbon-free electricity sources, every hour of every day, everywhere (2). Yet to achieve this, a stable, carbon-free energy system requires a mix of renewable energy technologies designed to maintain a stable supply.
Corporate demand for 24/7 CFE will see broader system benefits through increased deployment of renewables, alongside demand for solutions designed to add flexibility to a fully carbon-free energy system. In the corporate PPA space, this will translate to increased demand for Hybrid PPAs containing a mix of renewable energy technologies and/or storage. Finally, a 24/7 approach will enable better matching of the PPA production with the corporates’ consumption profile, which is key to reducing the price risk.
Regulatory Considerations
In the last year, the RE100 has seen two revisions impacting the renewable energy market in Europe; i) Market Boundary consideration and ii) facility age limit.
The Greenhouse Gas Protocol also announced the “official start” of its latest revision process in June 2023, with a draft text expected in 2024 with final guidance in 2025 (3). It will consult corporates during the process and has conducted a stakeholder survey on the Scope 2 guidance.
Based on initial feedback, renewable energy certificates (RECs/EACs) come under scrutiny with a strong case to prove additionality as the RE100 is now mandating. Additionally, proximity of the offtaker to the generating asset is interrogated. Here, a divided preference among corporates exists for location-based vs. market-based accounting, with arguments for their value and potential drawbacks raised on either side.
Irrespective of what the revisions deliver, we expect to see an increased demand for PPAs as corporates move away from unbundled certificate procurement in light of RE100 changes, but whether or not the question of proximity has implications for virtual PPAs in the European Market remains to be seen. Whilst corporates can expect tightening regulations around what constitutes a credible claim to renewable energy, the EU’s RED III and EU member states’ individual policy drivers are all geared towards enabling the scale up of a carbon-free energy system.
Take home message:
Despite strong competition amongst corporate buyers, developments required to support the renewable energy technology mix and a raft of ESG regulatory changes on the horizon, we anticipate there being no shortage of opportunities for corporates when embarking on the renewable energy transition.
As a pure-play renewable energy advisory to multinational corporates, we regularly support companies gather a solid understanding of the regulatory conditions alongside the market opportunities to fit their needs. We work closely with our clients to build a tailored transition strategy and provide transaction advisory to navigate the complexities and reach a successful conclusion on their renewable energy transition.
Contact us to find out how we can support on the renewable energy transition across Europe and Asia.
Resources:
- S&P Global Commodity insights
- United Nations 24/7 Carbon Free Energy Compact
- GHG Protocol Newsletter, “Standards Update Process: Where We Are Now,” June 5, 2023
Emma Foot
Senior Manager, Client Engagement and Sales
With over 8 years of experience in corporate sales, client relationship management and solution delivery Emma possesses a clear ambition for driving positive change within the corporate world. Experienced in aligning clients’ sustainability ambitions with commercially viable solutions, mapping out benefits over and above direct execution whilst ensuring exceptional service delivery. At act renewable, Emma ensure clients’ renewable energy potential is realised whilst complementing their wider business strategy and vision, cultivating a true value-added partnership.
Connect with Emma at Emma.foot@actrenewable.net
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Want to know more? Reach out to the team for support in accelerating the corporate renewable energy transition: contact@actrenewable.net