Corporate Clean Energy: Momentum Continues Despite Policy Uncertainty - Insights From CEBA Connect

Priya had an insightful week in Minneapolis at the CEBA Connect Spring Summit learning from our peers on clean energy procurement strategies and discussing the road ahead for the broader energy industry in the U.S. Below are some of the interesting themes she wanted to share.

Corporate buyers remain committed to clean energy goals

Despite uncertainty around energy and climate policies, corporate buyers are continuing to pursue clean energy goals. The event celebrated CEBA members surpassing 100 GW of clean energy procurement since 2014. Wood Mackenzie estimates corporate demand for carbon emissions-free energy will grow to 275 GW by 2035, and the corporates in the room suggested that that growth will be met.

Throughout the conference, buyers discussed a range of energy procurement strategies involving a combination of power purchase agreements (PPAs), virtual PPAs, onsite generation, unbundled renewable energy certificate (REC) purchases, and green tariffs. Procurement approaches varied based on industry and companies’ purchasing power. Smaller corporates, for example, may not have the sufficient load to contract a PPA. In addition to leveraging options like green tariffs, some creative approaches came up during panel discussions:

• Smaller buyers may consider pooling their load together for procurement to increase purchasing power. Examples could include office parks or entities that have shared manufacturing.
• Conversely, large corporates might consider procuring RECs on behalf of their supply chains to speed up clean energy adoption (one such example of this is Mars). The challenge here is in educating suppliers and obtaining buy-in on clean energy procurement, a lengthy process and cumbersome for smaller suppliers.

It’s worth noting here that under current SBTi standards, retiring EACs on behalf of a supplier entity cannot be used to reduce your Scope 3 emissions, as the supplier would need to retire the EACs and apply them to their own Scope 2 emissions. Joint procurement may still make sense regardless to help your suppliers leverage the scale of a larger organisation.

Pursuing clean firm energy

Although solar continues to lead the pack in newly contracted capacity, corporates are demonstrating notable interest in utilising clean firm energy supply, including geothermal and nuclear (both conventional and small modular) technologies. Having clean, dispatchable technologies will be important to achieve 24/7 carbon-free energy (CFE) goals.

In a session on clean firm technologies with buyers and utilities, panelists expressed the need for clean firm energy to maintain grid reliability while moving towards a less carbon-intensive grid. Due to the relatively higher cost of these technologies, there was general consensus that clean firm sources would remain part of a broader portfolio of options, such as solar, wind, and storage. Energy providers also noted that natural gas remains an important part of the technology mix to meet today’s demand.

Tax credit repeals and tariffs loom

Though progress in clean energy procurement continues, energy buyers and providers alike highlighted the need for clear and consistent policies in the long run that could affect investment decisions.

Attendees highlighted the possible repeal of Inflation Reduction Act (IRA) clean energy tax credits as a cause for concern, along with to-be-determined tariffs on energy imports and on component goods needed for new project development. A state of the market review noted that electricity prices in the U.S. are projected to rise if clean energy tax credits are repealed.

Editor’s Note: At time of writing, the House budget proposal, if approved, would cut various EV and clean energy tax credits, including an expedited phase-out of the 48E investment tax credit and 45Y production tax credit, though the final bill may ultimately differ.

Transmission constraints are a concern for meeting predicted load growth

The U.S. expects significant load growth in the years to come, driven in large part by investment in manufacturing and data centres. To meet this, estimates expect the transmission system needs to at least double by 2050. However, new high-voltage transmission construction has dropped in the last decade, with only 55 new miles built in 2023.

Various sessions broached the need to improve transmission capacity; without it, energy projects — of all technology types — will remain stuck in the interconnection queue. The overwhelming majority of capacity in the queue is in solar, wind, and storage. These projects could accelerate grid decarbonisation if approved from the existing queue.

Possible solutions to the transmission bottleneck include:

• Reconductoring, which can significantly increase capacity with existing right-of-way and at a lower cost than constructing new transmission lines
• FERC Order 1920 aims to improve longer-term regional transmission planning

Closing thoughts

Though possible headwinds lie ahead, it’s clear that the conviction to pursue voluntary goals remains, and corporate offtake is key in securing new clean energy projects. Collaboration between buyers, energy providers, and service/solution partners will be essential to continue driving progress forward.