As Apple, Google and Others Promote Renewable Power, What Is the Best Way to Evaluate Corporate Energy Leadership?
At 62 percent of U.S. retail electric sales, commercial and industrial electricity consumers can substantially influence the demand for renewable energy and accelerate the pace of electric sector decarbonization.
The good news is that businesses are increasingly interested in – and promoting – their leadership on renewable energy. Apple recently announced it is " globally powered by 100 percent renewable energy," and Google said it now buys " more renewable energy than it consumes."
These announcements raise an important question: How should we evaluate leadership in this field?
It can be tempting to try to zero in on a single metric. However, communicating impact holistically is a better way to capture leadership.If we look at impact holistically, we can start to see the frontiers of renewable energy leadership that not only inspires other businesses to join but reduces net GHG emissions beyond what has been achieved to date.
Everybody Wants Additionality—But There's More to It
Not every corporation has the market power to make a splash like Google or Apple, but lots of businesses that buy renewable energy are interested in how they can make a material impact in increasing renewable energy generation and lowering carbon emissions.
Many have zeroed in on additionality, a term borrowed from the carbon offsets market, where it describes new projects that result in verifiable emissions reduction or avoidance, to mark themselves as leaders. Additionality broadly refers to the quality of having brought new renewable generation to the grid.
However, the specific, verifiable tests for additionality in the carbon offsets market don't effectively translate into corporate use of renewable electricity, which leads to confusion and misuse of the term, and a narrow view on the types of actions that are impactful. And with this narrow lens, a buyer can lose the ability to describe how and why a company's renewable energy purchases are helping to transform the electricity market.
There are many ways customers can drive impact. Small and mid-sized companies with strong local ties can be profoundly influential regionally – inspiring other businesses in the community to act and providing established credibility with regulators in regulatory proceedings. In addition, there could be innovative arrangements where a customer helps to accelerate net GHG emission reductions, but individual credit is harder to claim.
How do you give credit for example, in a case where a company collaborates with a utility, like Xcel Energy, to help the utility achieve its voluntary carbon emissions reduction target of 80 percent by 2030 even faster? That could arguably drive greater impact than just thinking about individual projects to meet corporate clean energy goals. And how do you categorize the impact of a company like Lyft, announcing that it is going carbon neutral? Both demonstrate leadership, but the actions and impact are different and difficult to compare.
To credibly and effectively articulate the company's role in positive outcomes, there are two key elements:
What you did – Transparently communicating what the purchase is; its scale, scope and term; how it goes beyond regulatory requirements; its impact on new or existing generation and GHG emissions.
How you did it – Clearly describing your role in the outcome; financial and risk positions in any project or purchase; role in influencing policy changes; increasing access for other consumers; or other aspects of participation in the renewable energy market transformation.
Opportunities Beyond Additionality
By engaging directly with their utilities, regulators, and supply chains (or working through platforms like the Renewable Energy Buyers Alliance), leading buyers can drive the electricity market further, faster. Luckily, many large consumers of electricity—companies like Google, Walmart and General Motors as well as cities like Austin, Chicago and Philadelphia—understand that their market power can help bring more clean energy onto the grid, not just for themselves, but for others.
Thinking about impact in a more systemic manner, we can identify new, innovative ways for buyers to lead on renewables. Here are two opportunities we've seen materialize:
- Looking beyond new projects in isolation. A new solar project may bring new renewables capacity to the grid, but may also require a coal plant previously slated for retirement to stay online to accommodate weather- or night-related base load concerns, or push out slightly more expensive solar and wind projects instead of fossil-fueled electricity. As more renewable energy comes on to the grid, it's important to start thinking about the net GHG emissions impact that the project might have.
- Accommodating innovative collaborative possibilities. Additionality is focused on crediting new renewables to a single actor. But some of the most exciting scenarios involve collective action between a buyer and a utility, or even between many buyers and a utility on integrated grid solutions that could deliver more system transformation at lower cost with storage, demand side management and EV integration.
Adobe makes for a fascinating case study. They want to ensure that the energy they purchase is adding directly to the local power grid. Their recent deals have been small projects—2.5 megawatts of solar in Bangalore, 10 megawatts in Nebraska—but each of these transactions have been through new, innovative project designs in conjunction with other large customers and local utilities. This has helped open opportunities for other customers to buy renewable energy in new markets, and increased the renewable energy generation in these local power grids.
If you focus just on the size of the new renewables online as a result of Adobe's actions, the impact that Adobe has played in opening up these markets to more transactions is lost. Only when we look holistically at impact is Adobe's contribution clear.
No one purchasing option will always serve that ever-moving frontier, but transparent communications about impact can start to fuel the desired change.