What does RE100’s Facility Age Limit Requirement Mean for your Business?

From January 1^st 2023 the RE100 technical criteria now require corporate buyers to comply with a fifteen-year commissioning or re-powering deadline when procuring and claiming renewable electricity.

RE100 is a global renewable energy leadership initiative established by The Climate Group, in partnership with CDP. More than 400 of the world’s leading companies are members of the RE100 initiative and have committed to sourcing 100% of their electricity demand from credible renewable energy sources by 2030 as an interim step and fully by 2050.

The primary intention of RE100 is to emphasize procurement of renewable electricity which adds new renewable electricity capacity to grids. RE100 highlighted that older renewable electricity generation is still an important resource for the power grid, however procuring electricity from it does not directly change the grid mix. Therefore, renewable electricity procurement from old generators is less impactful.   As a result, if companies are procuring renewable electricity from older generation facilities e.g., unbundled energy attribute certificate (EAC) from 20-year-old hydro power facilities, it will not count towards their RE100 goals moving forward.

In this article we look at what this significant change means for corporates sourcing renewable electricity and how it will impact procurement across the globe.

Accelerating the global transition to renewables

Energy production and use contribute to around two-thirds of global GHG emissions, putting the energy sector at the core of climate change mitigation efforts. Electricity is responsible for the lion’s share of those GHG emissions at ~65% of all energy-related CO2 emissions. The sector has the highest potential for decarbonization, presenting a great opportunity. Renewable technologies could generate more than 80% of all electricity by 2050 acroding to IRENA, with the remaining 20% generated by natural gas and nuclear. Accelerating installation of NEW renewable energy generation capacity is hence needed to ensure we meet the goals.

With more than 50% of global electricity demand coming from businesses, they are in a unique position to accelerate and shape the world’s transition to a renewable energy future. Renewable energy is cost-competitive compared to conventional energy and is fast becoming a preferred choice among businesses. A significant investment in the renewable energy sector can be directed by increasing demand for renewable electricity via businesses around the world, leading to more installed capacity. However, how businesses source renewable electricity is a crucial aspect to maximize impact and accelerate the installation of new capacity.

The RE100 Facility Age Limit Requirement

RE100 now requires members to report the commissioning or repowering dates of the generation facilities they are procuring renewable electricity from. This information should be submitted annually. In case the generation facility is older than 15 years, procurement from it will no longer be credited in the RE100 goal. We anticipate that other reporting platforms, such as CDP’s climate change disclosure program, will adopt this rule. While the Science-based Target Initiative (SBTi) doesn’t have these specific requirements at present, we predict they will align with RE100’s best practices in the future.

Exemptions

Companies often generate their own energy or procure via long-term contracts from the supplier, often beyond a 15-year term or through extension of a contract after a 15-year term. Such renewable electricity sourcing is impactful despite it crossing the 15-year term, as it provides long-term security to the project investors. For this reason, RE100 has identified a handful of exceptions where the facility age limit requirement, i.e. a 15-year commissioning or re-powering date limitation, is not applicable. These scenarios include:

• Self-generation (company-owned generation facilities) e.g. rooftop solar
• Long-term project-specific contracts, e.g. PPAs, which the corporate buyer has entered into as the original off-taker* for the project, and extensions of those contracts, even if they exceed 15 years in length, including:
• Physical/financial PPAs with on-site or off-site projects
• Project-specific contracts with electricity suppliers*
• Project-specific contracts for unbundled EACs*

Companies will face difficulties in following this new requirement when they either procure renewable electricity via:

• • • Utility green tariffs or green electricty programs. These products have low transparency on the mix of renewable energy generation facilities that they are sourcing renewable electricity from.
    • Unbundled EAC (Renewable energy certificates, e.g., REC, GoO etc.) procurement, which are usually provided by brokers, and are often from large and old hydro power generators.

Going forward, the provider of these products must prove that the generation facilities are not older than 15 years at the point the green tariff/EAC is sourced, for businesses to use this against their target. This makes it impossible to offtake renewable electricity from un-specified source and un-bundled EAC route from 2024 onwards if the generation facility is older than 15 years. If an RE100 member company does not know the commissioning date of the RE facilities that they are sourcing renewable electricity from, they are able to exempt up to 15% of their total electricity consumption from the 15-year rule. This provision will be helpful in the short-term but limits the un-specified share to 15%.

The following chart shows RE100 members’ renewable electricity consumption by commissioning date reported in 2022: