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Corporate sustainability requires impactful clean energy investments

Not all renewable energy projects are created equal when it comes to displacing fossil-fuel generation.

By Hannah Badrei, Vice President of Energy Supply Advisory, Edison Energy

As climate impacts continue to ramp up, so too has the global response, particularly from the private sector.

More than 350 major companies have committed to 100% renewable energy as part of the RE100 global initiative. Nearly that many have joined the Climate Pledge co-founded by Amazon, committing to hit net-zero carbon by 2040 —10 years ahead of the Paris Agreement target.   

In addition, over 2,000 companies are leading the zero-carbon transition by establishing emissions reduction targets through the Science Based Targets initiative (SBTi).  

SBTi recently released its first Corporate Net-Zero Standard, which will require rapid, deep cuts of 90-95% of value-chain emissions to limit global temperature rise to 1.5°C. The Standard calls on companies to cut emissions from their entire value chain, including those produced by their own processes (Scope 1), purchased electricity and heat (Scope 2), and generated by suppliers and end-users (Scope 3). 

Beyond SBTi standards, many companies have tackled Scope 1 emissions via carbon offsets and Scope 2 emissions via renewable energy and Renewable Energy Certificates (RECs).

Specifically, corporates have been addressing their Scope 2 emissions by entering into Virtual Power Purchase Agreements (VPPAs)—wholesale financial contracts to buy renewable electrons anywhere in the grid. Opportunities for companies to buy financially settled products such as VPPAs have been a critical step towards weaning society from our reliance on carbon fuels and reducing our collective carbon footprint.  

Avoided emissions 

Not all renewable energy projects are created equal when it comes to displacing fossil-fuel generation. Avoided emissions occur when adding 1 MWh of electricity from a renewable energy resource replaces 1 MWh from a marginal fossil-fuel generator at a specific time and place. But because emissions reduction of a new renewable resource drastically differs between locations, depending on how dirty the power grid is, procuring renewable energy in high-impact locations is critical. 

Corporates could realize an additional 34% more in emission reductions by simply accounting for emissions avoidance (“emissionality”) in their renewable project strategy, according to WattTime. Edison Energy recently partnerred with the environmental tech company to help corporate renewable energy buyers achieve carbon emission reductions and reach their net-zero goals.

Companies should assess the emissions avoidance of the projects they are evaluating as key criteria for selection. The historical avoided marginal carbon emissions per project are calculated by using the previous calendar year’s data. The inputs to the calculations are WattTime’s five-minute marginal emissions data and Edison’s project generation modeling, simulating the project’s performance under experienced weather conditions. This allows historical avoided marginal carbon emissions to be reported as metric tons of carbon dioxide equivalent (MTCO2e) for the calendar year analyzed.

This analysis, paired with projected project cash flows, allows customers to evaluate projects based on $/MTCO2e avoided rather than just the expected cash flows ($/MWh) from the project.

Access to data on real-time and historical carbon emissions reduction means the ability to fit renewable energy projects into an overall sustainability strategy, one that drives the most impact out of their renewable energy procurements.

Scope 3: Tackling supply chain emissions  

Organizations’ supply chains often account for more than 90% of their GHG emissions. Over the last decade, leading organizations across diverse sectors have developed GHG inventories and instituted GHG-accounting practices to reduce their own Scope 1 and 2 GHG emissions.

To measurably impact climate change, however, it is crucial that clients look beyond their own emissions and focus on their value chain, both upstream and downstream.

Leading organizations are setting up programs to enable their supplier partners to reduce their own emissions. These programs start with education around why carbon reduction is important to their business, along with data collection to create a baseline, and the ability to identify solutions that can be implemented to match each supplier’s unique circumstances.

This is an enormous undertaking across a supply base of potentially thousands of companies. Making a genuine, measurable impact requires commitments from organizations to not only set Scope 3 emissions reduction goals but to embed emissions reduction into their business practices, both for procurement and company culture purposes. This requires a multi-year effort across all facets of an organization— from procurement to finance and treasury—culminating in the inclusion of emission reductions as a key criterion for supplier selection. This is the best way to help companies understand the direct business case for investing in sustainability.

Edison is supporting clients in addressing their Scope 3 emissions, assisting in the development of a GHG inventory, sustainability goal setting, and roadmap development. We facilitate supply chain programs that include energy efficiency best practices with financing options, onsite solar implementation, and offsite PPA aggregation for midsize suppliers, as well as other financial structures such as overbuying RECs, providing credit support, and serving as the commercial anchor for large PPAs.

Environmental and social justice 

Corporates must answer the question, “What kind of impact do you want to make?” This means converting renewables purchases into impactful renewables purchases and tying them to specific sustainability goals. These goals may fall outside of the GHG emissions-reduction sphere and instead focus on local impact, educational initiatives, and environmental justice communities.

Beyond the procurement of renewable energy, developing a project strength score, which integrates environmental and social justice criteria, enables corporates to evaluate prospective renewable projects via this new lens. Edison hopes to play a key role in promoting and fostering the right partnerships to advance this critical cause.

Specifically, Edison has begun working with Indigenous communities, launching preliminary discussions with developers around a potential partnership with a development entity that focuses on renewables development on Tribal lands. Edison plans to present these project opportunities to major clients, in addition to strategizing with developers on the necessary PPA price guarantees and incentives to spur interest in developing projects in Tribal communities. 

Tribal land has enormous renewable generation potential, according to an NREL analysis. However, due to the uncertainty of offtake and timing, the risks associated with developing on Indigenous lands have proved challenging for renewable energy developers. 

Edison’s vision is one where the Tribe, developer, and offtaker come together early in the process to help mitigate the project’s early-stage development risk and provide some level of certainty for the developer. With this model, Tribes and communities will receive a local investment of significant scale, while developers can actually build their projects. In addition, project offtakers become critical players in providing support to Tribes and local communities.  

About the author

Hannah Badrei, Ph.D. serves as Vice President of Energy Supply Advisory at Edison Energy, leading the clean energy advisory team and the power and gas supply procurement functions. She brings nearly two decades of energy commodities experience in the power and renewables sectors. Her expertise spans go-to-market strategy development, origination, deal structuring, and quantitative analysis. 

Prior to joining Edison Energy, Badrei served as Vice President of Power & Renewables Origination at Shell Energy, where she was responsible for commercial and industrial origination and led the launch of the company’s off-site renewables platform. Prior to that, she managed commercial and analytics teams at the Boston Consulting Group and Calpine Corporation. Badrei began her career as a quantitative energy analyst, holding roles in risk management and energy procurement at Pacific Gas & Electric.  

Badrei has chaired the Houston Chapter of WRISE (Women of Renewable Industries and Sustainable Energy), remains active at the national level, and is an advocate of women entering and achieving leadership roles in the renewable energy and sustainability sectors. She holds a Ph.D. in computational finance from Rice University. 

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