NREL Explores How Corporate Procurement Can Advance Renewable Energy Deployment

NREL Explores How Corporate Procurement Can Advance Renewable Energy Deployment

Clean Energy Buyers Provide Price Certainty Needed for Renewable Energy Investments

The transition to a decarbonized power system requires significant investments in clean energy generation, transmission, and storage. However, securing that investment capital is a key challenge.

For example, many power systems models focus solely on costs and overlook a critical factor: risk exposure to investors. If unaccounted for, this could ultimately lead to an overestimate of the actual deployment of renewable energy needed in our power system.

Alongside compliance buyers such as utilities, corporate investors-known as "offtakers"-are increasingly buying the electricity from renewables directly as part of a "voluntary market," offering the type of price certainty to renewables projects that is needed for their initial capital investment.

This rapidly growing role of corporates in renewables procurement brings new research questions, including how voluntary market activity drives renewables deployment and how a diversity of voluntary market approaches (such as hourly matching and emissions matching) impacts power systems operations.

To address these research gaps, the National Renewable Energy Laboratory (NREL) is partnering with Meta, one of the largest corporate buyers of renewable energy globally. Together, NREL and Meta are collaborating on a series of reports that will allow greater insight into corporate renewables procurement and the enabling conditions for clean energy investment.

In a first research project, NREL-in collaboration with research consultancy Aquilo Energy GmbH-will investigate the common traits of corporate buyers and their future role in renewables procurement.

"We hope to inform corporate buyers and regulators about the characteristics of renewables procurement and its impacts in today's power markets," research partner Philipp Beiter from Aquilo Energy GmbH said. "As corporations' roles as offtakers grows, a greater body of research can explore their exact role in mitigating power price risks and the interaction of corporations' long-term contracts with other power market features."

Why Corporate Offtake Matters

NREL has led research on U.S. corporate procurement with its annually published market report Status and Trends in the U.S. Voluntary Green Power Market. Additionally, a 2023 perspectives article in Nature Energy showed that long-term contracts (so called "contracts for difference") established between power producers and offtakers are necessary for renewables financing because they offer a level of price stability that is largely absent in wholesale electricity markets. Rather than constituting a subsidy, these long-term contracts-whether offered by utilities, governments, or corporations-serve the purpose of risk management and are becoming lasting and fundamental market features.

The 2023 perspectives article was meant to stimulate a timely discussion about the impact of greater long-term contracts diffusion on electricity market mechanisms and risk allocation, which this research effort between Meta and NREL builds upon.

"De-risking renewable generation revenue is critical for securing financing for the construction of renewable projects," said Jenny Heeter, NREL's principal investigator on the project. "We hope to explore how corporations manage these risks and whether that could limit future renewable energy deployment."

Through this work, the NREL researchers aim to explain that even when renewable energy costs are competitive with fossil fuels, long-term offtake agreements are typically still needed for their deployment. Recognizing this dynamic is crucial for policy and power systems planning, which often overstates renewable energy demand and underappreciates the importance of corporate procurement in driving renewable energy deployment.

This research is funded by Meta Inc., one of the world's largest renewable energy buyers. Since 2020, Meta has matched 100% of its electricity use with renewable energy.

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