Three key trends are driving the renewable energy procurement market as it matures.
- Additionality
This implies that corporate buyers encourage the development of new renewable energy plants. A corporation can help make a windfarm project that has been planned (but not yet funded) a reality. The corporate buyer offers the developer sufficient certainty to develop the windfarm by executing a CPPA, which guarantees a revenue stream. Another condition for being regarded as additional is that the project does not get any subsidies. As public society pressures corporations to raise their green ambitions, the trend of purchasing renewables from alternative sources is expected to continue.
- Constant supply
Over 50 businesses have already committed to sourcing 100 percent renewable energy, and hundreds more have pledged to do so. In practice, this implies annually matching a company’s power use with renewable energy generation. However, as goals grow, some are now attempting to match real-time electricity consumption with an equal quantity of renewable supply (for instance, within the same hour or even less).
Baseload renewable power (for example sustainable biomass or even geothermal) or storage is needed to make this practicable over a long-time horizon. However, it should be mentioned that, as of now, 24 hours a day, seven days a week is a guiding star. Even the most forward-thinking businesses do not anticipate matching 100 percent of their power on an hourly rate. Rather, they’re searching for ways to raise the share of matching green power and eventually reach 100 percent renewable power 24 hours a day, seven days a week.
- Improvements in regulatory frameworks
Administrative hurdles continue to stifle development. On the supply side, the construction of wind and solar necessary to reach corporate demand in the regions where it is needed is hampered by slow and unreliable permitting processes. On the demand side, there are additional obstacles. Heavy regulation often prohibits renewable buyers from engaging in the electricity market and accessing the grid, as a document published by the World Economic Forum in 2021 demonstrated – notably in emerging nations.
The elimination of regulatory hurdles will allow renewable energy to reach its full potential, resulting in major economic benefits such as higher business investments and decreased energy costs from competitive renewables. It appears that more and more regulators are recognizing these advantages. The EU, for example, recently suggested legislation to cut emissions by 55 percent by 2030, among other things, through promoting CPPAs.
