As Amazon's head of energy and environmental policy for EMEA, Jake Oster, put it, “These types of forums are exactly what we need…Re-Source exists to bring buyers up the learning curve.”
Though there was some disagreement over certain issues, particularly 24/7 matching, everyone agreed demand is on the increase. “All the evidence points to demand increasing,” said Oster. But the obstacles to supply remain the same, the arduous permitting process, grid congestion, the electrification of heat and particularly in light of the current energy price spike, the cost of renewables.
De-risking renewable PPAs
PPAs often last from 10-15 years and as such the deal itself can be worth hundreds of millions of Euros. “These are huge risks,” said Eneco's Lucien Wiegers. And while some corporate buyers might balk at a 10-15 year contract when they're used to buying their electricity on a much shorter basis, Shell's Colin Brooks pointed out that natural gas has been sold on “very long-term off-take agreements too”, so the time-scale isn't exactly new. Nevertheless, Brooks continued, “there's space for innovation and standardization of these contracts.”
Of course, the biggest risks involved in PPAs is that faced by renewables in general, such as the permitting process. Enrico Ambrosini, SVP, Green Investment Group, said the “permitting process still has plenty of obstacles. The European renewable strategy has to be transmitted to local permitting”, and the system operators should be incentivized to reply sooner. “Governments need to listen to the problem on the demand side,” he said. This latter point was echoed by Ørsted's Alana Kühne, “We don't have the framework to bring corporates and governments together.”
Engie's Jerome Malka stated that the “regulatory environment needs to foster more deployment”, but was “very excited to hear the EC was ready to step in for credit guarantees.”
Axpo's Christoph Sutter pointed out that the easiest way to de-risk your PPA investment is, firstly, to do your due diligence, and albeit obvious, to sign on to a PPA toward the end of a project's development. Perhaps less obvious, however, is his advice to individualize a contract by insisting on a “replacement option” should there be an issue with the contracted renewable generator.
Ultimately, as Statkraft's Pieter Schipper pointed out, “there are all sorts of flavors of renewable PPAs,” and something can be tailored to fit.
On the contract side, there are several ways for PPAs to be made more manageable. Wiegers spoke about making the procurement process as normal as possible for smaller buyers, as normal as a traditional electricity contract, that is. And in order to make more PPAs available for smaller customers, Wiegers said big projects could be chopped up into smaller, bite-sized pieces.
Of course, it should be remembered that in the case of renewable energy uptake, an SME should be regarded in terms of its load, not its number of employees or any other measure. Nevertheless, SMEs need to be better incorporated into the global PPA market, that was clear in the messaging of the event. And what was also stressed was the problem of super locally connected corporates that would not think to come to Re-Source 2021, these companies also need to hear about the benefits to renewable energy PPAs and virtual PPAs.
24/7 sourcing/matching was certainly a key trend of Re-Source 2021, with many calling it an “absolute must for decarbonization.” 24/7 matching refers to calculating renewables consumption on an hourly basis as opposed to an annual basis. This means matching renewables with real-time demand, and according to Iron Mountain Data Center's Chris Pennington “more and more companies are wanting 24/7”.
For companies pursuing 24/7 it gives them a much more detailed overview of their consumption, more visibility about what you're consuming every hour. In terms of overview, it is the difference between a map of the world and Google Earth.
Speaking of Google, Google's Brian Denvir said the tech giant is “pursuing 24/7 because it is the best way to go if we want to totally decarbonize our operations and the grid.” From Google's and Denvir's perspective, the tech giant has been on the forefront of renewable energy purchasing for 10 years, so “we're in a position to push the boundaries.”
FlexiDao's Simone Accornero argued that annual reporting gives a false impression of consumption, pointing with Powerledger's Cristina Mata Yandiola to the need for granularity. EnergyTag's Killian Daly stated it simply, “If we don't look at time, we're not looking at the problem.”
These advocates of 24/7 also pointed to its necessary encouragement of energy storage and demand-side flexibility. Denvir noted that such granularity would enable more buying on the same grids and the opportunity for buyers to find complementary generation profiles that fit their needs.
Nevertheless, the advocates were aware of the job ahead of them in terms of convincing everyone. After all, many corporates who are looking for ways to renewables to cut costs, cut emissions and achieve climate pledges, don't see the point in opening themselves up at the granular level. “If a grid is 100% renewable,” one person said to pv magazine, “24/7 becomes meaningless.” The underlying suggestion being that everyone should get behind one clear goal, rather than changing the metric all the time.
In confidence, some buyers were confused that it was possible to reach 100% renewables on an annual basis and not on an hourly basis, suggesting it felt like the big tech companies were moving the goalposts to benefit their own resources. For industries, like the chemical industry for instance, it can be much harder to decarbonize than in the tech sphere, and in their eyes 24/7 sourcing will only slow the rate of decarbonization, making it harder and make certain hard-to-electrify industries look worse.
The counterargument from advocates of 24/7 matching was the sheer complexity of the global energy market, and the statistic that many at Re-Source 2021 kept citing to illustrate this complexity was that Germany has 900 Distribution System Operators (DSOs). “900!”
“Market-based accounting of carbon is going to lose favor,” said Pennington, “the other measurement needs to be a granular/hourly measurement.” With many on the software side agreeing that a new metric is needed to drive toward corporate decarbonization.
Some questioned the prioritization of temporal matching versus geographical matching. But most seemed satisfied with the idea that temporal matching is necessary over the next 10 years or so to ensure fewer geographical boundaries and a more liquid market, but that in 10-15 years time, once a speed of transition has been set, then geographical matching will need to be stronger. Once the transition is established, it seemed to be thought, the less liquidity is needed.
Additionality has been one of the buzziest of buzzwords in the renewable energy sector in recent times and Re-Source 2021 was no different. Of course, one of the reasons ‘Additionality' is such a buzzy word is that, as Statkraft's Tiago Thomaz put it, “nobody really knows what ‘additionality' is.”
Indeed, the discussion of ‘Additionailty' at Re-Source 2021 began with an interactive mind-mapping of what the term suggests. In general, people understand ‘Additionality' to refer to the addition of new renewable assets to the grid, or on-site at a company's facilities, which would not otherwise have happened.
That last phrase is simultaneously the most important and the most ambiguous, hence the wide-scale confusion. Tomaz's definition settled on the idea that ‘Additionality' should refer to the addition of renewable energy which changes the status quo. Though again, that is not a clear metric for some, and corporate listeners were weary of such an ambiguous concept being mandated in policy or celebrated as the only metric of progress.
What is certain is that ‘Additionality' is seemingly as contentious an issue as 24/7 matching, with some big corporate representatives asking if it is more of a hindrance than a help. On the other side of the aisle, however, the argument for ‘Additionality' is the argument for choice, ‘Additionality' asks corporate energy buyers to make a choice between the status quo and adding something sustainable to the world. Of course, it may not be as simple as that, but the energy market isn't simple, after all, “There are 900 DSO's in Germany!”
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