A Seat at the Table: What Every Sustainability Manager Needs to Know about Procuring Green Energy

By Jim Heffron, Vice President, Product and Partnerships, Transparent Energy

We’ve observed a problem that is tripping up the sustainability initiatives of many businesses and institutions: overlooking the vital role of energy procurement in meeting sustainability goals.

Put more precisely, Sustainability Managers and Procurement Managers – or elevating this to their C-suite counterparts, Chief Sustainability Officers and Chief Financial Officers – can’t and shouldn’t treat energy procurement and sustainability efforts separately. They are part of a continuum upon which your success depends.

The solution to the problem is simple. Sustainability Managers belong at the energy-procurement table, because how and what energy your organization buys has a tremendous impact on your ability to execute your sustainability plans and bring them in on target.

We’ll be delving into these matters in our June 22 webinar, A New Gold Standard for Green-Energy Procurement (after which we will provide registration information for the replay), but let me whet your appetite here with three key points for all Sustainability Managers, Chief Sustainability Officers, and everyone in their organizations who cares about hitting their Corporate Social Responsibility (CSR) targets more quickly and efficiently .

1. Begin your CSR reporting process with all your energy contract data in hand, not vice versa. We know this sounds basic, but because the Sustainability side of the house isn’t often familiar with the energy-procurement side of the house, tragic mistakes are made – and they can be avoided!

Gather energy contracts at the onset of planning your comprehensive sustainability strategy. This process will make it easier for you to find, and accurately report on, the energy data you need for setting your CSR baselines and monitoring them in perpetuity.

Jumping on gathering energy contracts for all of your sites now will also help you, in concert with the aid of an experience energy advisor, identify cost-saving opportunities that can fund key sustainability initiatives and/or help you target energy purchases that will quickly advance your sustainability goals (more on this below).

To put this all in context, let me share a story with you.

A large holder of commercial properties built out a Sustainability team to develop and implement a long-term Sustainability plan. But that team didn’t manage, or really even know about, the company’s energy procurement decisions. In fact, energy procurement was totally decentralized at the company, with each building manager running their own process and making their own deals (a big problem when you own tens, hundreds, or thousands of buildings).

Instead of working to gather this data up front, the Sustainability team focused on other aspects of its CSR reporting. When it finally did get to pulling together the company’s current energy contracts, the process took an additional six months. Not only did the Sustainability team have to dramatically revise its report based on the information it uncovered, but in all the time that had passed, energy prices had climbed dramatically.

In essence, by finishing with energy contracts instead of starting with them, energy markets had moved up (remember, energy is a volatile commodity), and the company had lost a significant opportunity to buy renewable energy affordably – a lost opportunity and an expensive lesson, both in dollars and in time to fulfill sustainability goals.

2. Know Your Options. Companies have many choices when it comes to buying renewable energy, each with their own merits, risks, and timelines. To help you make the best purchases for your company, here are the three that you need to understand:

• Renewable Energy Certificates (RECs) – RECs are a financial instrument that represent the green attributes of 1 MW of clean power. While many companies have long-term ESG goals of reaching zero-net-carbon operation, most don’t understand that they can green part or all of their operations quickly and easily by buying RECs now. You need to be your company’s expert on RECs and also on how to procure them (more on that below)
• Renewable-Asset-Backed Retail Contracts – This is an emerging product category led by retail energy suppliers. Much simpler than power purchase agreements (which we will address next), renewable-asset-backed retail contracts offer commercial, industrial, and institutional customers renewable energy from a specific project with the convenience of a normal monthly power bill. With the help of an energy procurement specialist like Transparent Energy, your next energy contract(s) could fall into this category, greening your operations for 1-5 years, and potentially longer as you renew contracts, or enter into new ones upon expiration.
• Power Purchase Agreements (PPAs) and Virtual Power Purchase Agreements (VPPAs) – PPAs are long-term agreements contracted directly with new, large-scale wind and solar farms. In a PPA, a company commits to off-take part or all of a new renewable project – thus creating “additionality,” an attribute many companies crave for their CSR report – and directly uses the resulting energy. A VPPA is more of a financial hedge: it is a financially settled swap contract.

As you learn more about these options, keep in mind that PPAs are complex deals and can take a long time to deliver (they require a new renewable energy-producing project to be developed, which can take years), so even if you are interested in pursuing one, you should consider layering in the purchase of RECs and leveraging the benefits of renewable-asset-backed retail contracts.

3. Buy Renewable Energy Like a Pro. Knowing what renewable energy products are available, and how they will advance your sustainability goals, is important, but once you have that knowledge you’ll need to transact. How you procure green energy matters!

One common mistake to avoid: sole sourcing. That means never just buy a renewable-energy product without fielding competitive bids. Stoking competition for your renewable-energy contracts is how you gain leverage, which translates into better pricing, and ultimately ROI.

Transparent Energy is an expert on maximizing competition for your purchase of renewables through the use of online auctions for RECs and renewable-asset-backed retail contracts, and our platform for transacting more complex PPAs. In a Transparent Energy-led online auction event, we will bring multiple suppliers into your procurement to bid live for your renewables purchase. For PPAs and VPPAs, we leverage our platform and extensive pool of project developers to maximize your choices and reduce cost.

Let’s take a closer look at buying RECs.

If you need to buy RECs now, we can set up an auction for that. A more strategic approach would be to work with Transparent Energy to handle your entire electric or natural gas load and let us build the purchase of RECs or other renewable products into that procurement. For example, it’s easy for us to set up an auction where multiple suppliers are bidding on a 12-month, 24-month, and 36-month traditional energy contract, and then run those same terms with 25%, 50%, 100% green via RECs.

You’d be surprised at how effectively the price competition triggered by the auction reduces your cost of going green. In many instances, the auction drives down supplier prices so much that the resulting savings can cover the cost of buying RECs; in others, a supplier aggressively trying to win your business may “throw in” the RECs for free. The same competitive dynamic holds true for our auctions involving renewable-asset-backed retail contracts.

Ultimately, the Transparent Energy platform puts the renewable energy market to work for you, stoking competitive dynamics while giving you visibility into, and power over, your key sustainability purchases.

Competition, visibility, transparency, control? These are the virtues of online auctions from Transparent Energy that put you in the driver’s seat so you can fulfill your CSR and ESG goals at the right pace and cost for your organization and its many stakeholders.

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If you are ready to explore, or execute on, buying renewables to help meet your company’s CSR and ESG goals, please register for our June 22 webinar, A New Gold Standard for Green-Energy Procurement (and subsequent replay), or contact us at LetsTalk@TransparentEdge.com.