Under pressure from regulators, investors and customers, dozens of U.S. corporations have set ambitious net-zero carbon targets for their operations and their suppliers. At the same time, decarbonizing the power grid before mid-century is critical to meet the country’s obligations under the Paris climate accord.
Existing clean energy procurement models, however, are not widespread enough and not adaptable enough for wholesale grid decarbonization. These include "virtual power purchase agreements" (VPPAs), purely financial transactions where the corporate buyer purchases renewable energy certificates (RECs) but does not directly use the electricity generated by the project.
Overall energy demand has been mostly flat for the last decade. But some forecasters see electricity needs climbing quickly in the coming years as companies and corporations "electrify everything." Demand for renewable energy — and the transmission needed to distribute it — is set to soar, especially as sales of electric vehicles rise. Investment in the U.S. power grid is unlikely to keep up, these experts say.
"The pace of growth is breaking us," said Ben Chadwick, executive director of renewables origination at Baltimore-based utility Constellation Energy, speaking Feb. 12 on a panel at GreenBiz 24 in Phoenix. "How are we going to accommodate all this new load?"
Transformational but too complex
VPPAs are "incredibly complex," said Chadwick. They require long-term agreements and investment-grade credit, and are often too complicated for small and medium-sized companies looking to quickly decarbonize.
"VPPAs have fundamentally changed the grid for the good, but they’re not a transaction structure for the masses," said Chadwick.
"Renewable energy buyers are asking, ‘How can I achieve the most impact?’" said Henry Richardson, senior analyst at WattTime, a nonprofit that helps companies reduce greenhouse gas emissions from their power consumption, speaking on the same panel. "Should we buy renewable energy in India, where it will displace coal? Is it time for batteries?"
Under emerging Scope 2 and Scope 3 requirements for indirect emissions, "there are no rules for energy procurement," said Richardson.
For networking and technology giant Cisco, more than 90 percent of its emissions come from product manufacturing and product use, where energy consumption accounts for the majority of those emissions. It has committed to achieving a 90 percent reduction in emissions by 2040. That means "clean energy transition is critical to us achieving our goals," said Kelsi Doran, the company’s director of sustainability strategy. In early February, the company closed a 15-year VPPA in Spain that will supply 60 gigawatt-hours a year of zero-carbon electricity from solar power, c
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