How can cross-border renewable procurement deliver a faster, cheaper, and more equitable energy transition?
In this study, commissioned by Amazon, we explore how prioritising emissions impact for renewable procurement could allow corporates to catalyse the energy transition.
The International Renewable Energy Agency (IRENA) has stated that the world is off-track to meet the climate commitments of the Paris Agreement, and annual investment in renewable energy must more than quadruple to remain on a 1.5°C pathway. Emissions reporting standards today are defined by the Greenhouse Gas Protocol where the reported scope 2 decarbonisation impact of a renewable energy project is based on annual matching of the renewable generation to corporate consumption within the same geography, or ‘market boundary’. This is one reason why most corporate procurement is focused on Europe and North America.
This report shows that allowing corporates to invest in renewable projects with the greatest decarbonisation impact, regardless of location, could save 1.7 billion tonnes of CO2, and help drive $85 billion of investment into developing economies over the next 15 years.
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Read the report to find out more |
What does this mean for you?
What would the relaxing of market boundaries in scope 2 emissions reporting mean for my renewable energy procurement strategy?
There is still a lot of uncertainty as to what the final outcome will be of the Greenhouse Gas Protocol consultation, and they are targeting 2026 for the final guidance. Until this becomes clear, uncertainty will remain with regards to the best course of action for you and your company.
Should market boundaries be relaxed, whether that be fully or partially, it will open up new opportunities to buy renewable power in markets beyond your location of operation (and recognise the benefits). This could create opportunities to drive greater decarbonisation by purchasing renewables in markets that have grids with higher emissions intensities.
It is worth noting that contracting with renewables across borders introduces other risks and challenges that operating within-markets doesn’t incur. Some of these involve exposure to price changes between different wholesale power markets and exchange rate variations. The final mechanism that is designed to allow cross-border renewable procurement will have a big impact on exactly what these risks are and how they are shared and mitigated between the relevant parties.
In summary, and as our report shows, the relaxation of market boundaries could help to decarbonise the global power sector. It is intended to create new opportunities for organisations around the world to play a bigger role in decarbonising grids irrespective of location. However, the best course of action will always depend on the capabilities, risk appetite and role of power within your organisation.
What would it mean for my Power Purchase Agreement (PPA) strategy?
In most markets, the US/Canada and European Union being exceptions, PPAs are contracted within country. Should market boundaries be relaxed, it could create opportunities to procure PPAs across different markets. This could open up possibilities to procure more competitive PPAs than are on offer within market, but could also introduce more risk from contracting cross-border.
Procuring a cross-border virtual PPA requires a certain level of financial capacity and energy market knowledge to suitably manage the associated risks and exposure. For companies that are already active in this market and comfortable with the risks it presents, it is worth considering the benefits that a cross-border PPA could offer under a relaxation of market boundaries.
How does this relate to 24/7 demand-generation matching?
The relaxation of market boundaries is being considered by the Greenhouse Gas Protocol as part of the ‘impact-based’ reporting standard that would allow organisations to report their induced emissions with their avoided emissions that result from any renewable energy investments made, irrespective of location.
This is separate from the 24/7 matching standard also being considered, which relates to a more granular temporal and locational matching between demand and renewable generation. These standards are not being considered at the expense of each other and it is feasible that both impact-based reporting and 24/7 matching, or an evolution of these standards, comes into effect.
How long might it take for changes in scope 2 emissions reporting to come into effect?
The Greenhouse Gas Protocol is aiming to have a final publication of its revised scope 2 emissions reporting standards during 2026.
Read our blog post for the report on the Emissions First Partnership website.
Contact Hannah Simmonds to find out how we can help your business answer these questions.