Advancing DecarbonisationThrough Clean ElectricityProcurement

Executive summary An increasing number of companies are looking to ensure – and show – that they are trying to help mitigate climate change and contribute to clean energy ransitions. At the same time, more and more consumers want to choose products and services compatible with sustainable development. In this context, almost 1 000 companies across different activity sectors have pledged some form of emissions reduction or climate neutrality goals. To achieve these goals, many companies have started defining targets to reduce or eliminate emissions arising from their electricity consumption by procuring electricity from clean sources.

This report aims to support consumers of all sizes in choosing impactful ways to procure clean electricity. To this end, it provides guidance not only to companies but also to key stakeholder groups – policy makers, regulators, and system and network operators.

Corporates with more flexibility have potential for fast decarbonisation Companies and industries that rely on electricity for a major share of energy in their activities and who have flexible operations have high potentials for fast decarbonisation. For several key sectors – such as manufacturing of machinery and transport equipment, aluminium smelting, and commercial and service activities (notably information and communications technology [ICT]) – electricity already constitutes a major part of their direct energy use. Applying procurement strategies to leverage clean electricity generation can help these industries rapidly decarbonise a significant part of their emissions profile.

In turn, flexibility in production processes can facilitate matching demand with the availability of variable renewables, whether installed on-site or procured from the electrical grid. Common sources of demand flexibility within different company. 2010 to 27% in 2020. Greater efforts, on the part of corporates, to clearly demonstrate that procurement strategies contribute to new renewable electricity capacity is one of the reasons for this increase.

Many parameters influence the choice for one or another option, such as the size of the corporate, ease (or difficulty) of accounting, geographical availability, and availability of land (for BTM options). The corporate’s engagement towards proving actual decarbonisation impact also comes into play. These parameters are summarised in the table below and described more fully in the following sections.

On-site generation reduces grid electricity consumption with clear additionality Electricity generation on site is also referred to as “behind-the-meter” (BTM). This option requires sufficient resources (e.g. solar irradiance, wind speed or biomass) and space at the corporate’s facilities. Utility requirements such as the hosting capability must also be met. The installation can be owned by the corporate or leased, in which case the corporate rents its land to a clean electricity developer through a leasing agreement or an on-site PPA.

Procurement for smaller companies Enabling companies of all sizes to access clean electricity procurement options maximises the benefits of corporate procurement. In practice, despite the existence of several procurement options, not all are equally feasible for corporates of different sizes. Smaller companies can struggle with options, such as PPAs, that may be contractually complex and need high bankability.

Power sector modelling In order to provide in-depth analysis of the impacts of different corporate procurement goals, this report presents power sector modelling case studies for two countries – India and Indonesia. This analysis incorporates capacity expansion modelling based on corporate clean electricity procurement into the IEA’s India regional power system model and Indonesia regional power system model. India and Indonesia are selected to extend analysis of this topic to developing economies, relative to existing research examining markets in the United States and Europe. Several different scenarios are assessed, including the Announced Pledges Scenario (APS) for Indonesia and the Stated Policies Scenario (STEPS) and the Sustainable Development Scenario (SDS) for India. Comparisons are also made against a historical year (2020) and a highrenewables case for India.

Modelling analysis in this report assesses emissions impacts on a marginal basis for both load and generation, with a long-run perspective focusing on impacts in 2030 under specific scenarios. Procurement for all participating corporate load is assessed in aggregate (see Annex for detailed modelling methodology).

Modelling methodology To provide a deeper analysis of how corporate procurement could impact future power systems, the IEA has carried out two case studies on corporate-driven, cost-optimised capacity expansion, using our India Regional Power System Model and our Indonesia Regional Power System Model. The base scenarios analysed are the Stated Policies Scenario (STEPS) and Sustainable Development Scenario (SDS) for India and the Announced Pledges Scenario (APS) for Indonesia. Each case assumes that, in line with different clean electricity goals, corporates procure clean electricity generation amounting to 10% of commercial and industrial demand. This fixed share is used to illustrate the impacts of different clean electricity goals. In practice, some barriers to procurement exist in both countries.


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