Green Energy Procurement: Challenges and Solutions
Recently, we published an article on why your company should be procuring green energy. In that article, we explained the benefits of green energy procurement and the different methods of doing so. Now, it’s time to go more in-depth. We’re exploring the challenges your organization, company, or facility may encounter when procuring green energy, solutions to those challenges, and how EnergyWatch can assist you on your green energy procurement journey.
Top 4 Challenges of Green Energy Procurement
Previously, the challenges of green energy procurement were the limited availability of renewable energy from the grid and the high price of renewables themselves. Where renewables were not available from the grid, companies seeking to use green energy would have to generate it onsite via distributed energy resources (DERs). DERs were at one time much more costly than they are now, and harder to install. Fortunately, green energy resources have recently become dramatically cheaper and easier to implement across portfolios.
So, what are the remaining challenges of green energy procurement that you should watch out for? A 2016 survey by PwC found that the biggest challenges of green energy procurement among organizations are: Attaining internal support and backing from investors, negotiating procurement contracts, deciding on a strategy, and identifying a project. Let’s examine each challenge (and its solution!) more closely:
Challenge #1: Attaining internal and investor support
Before a green energy procurement plan can be implemented across an organization, internal and external decision-makers must be on board, and it can be a challenge to speak the language of a diverse group of investors and high-level executives.
Solution: Reiterate the benefits of green energy procurement
Presenting the myriad benefits of green energy procurement can create a compelling case. Here’s a list of the benefits for your reference:
- Dramatically reduce your organization’s carbon footprint
- Meet personal emissions goals (like net zero) and comply with any government emissions caps
- Serve as part of a sustainability management plan
- Diversify energy supply and reduce dependence on fossil fuels
- Support green energy development and new jobs in the sector
- Protect against future electricity price increases and volatility
- Generate customer, investor, or stakeholder loyalty and employee pride
- Create positive publicity and enhance your organization’s public image
- Demonstrate civic leadership in the fight against climate change
Challenge #2: Negotiating procurement contracts
In the energy industry, suppliers of energy usually have the upper hand in procurement contract negotiations because of the technical nature of the industry. Negotiating confidently is only possible when you have a clear understanding of both the terms of the contract and the other procurement options available.
Solution: Enlist the help of a knowledgeable third party
Using a third-party guide to help you negotiate the sometimes-stormy waters of green energy procurement contracts can save you time, money, and considerable trouble.
Challenge #3: Deciding on a strategy
In order to avoid flying blind into green energy procurement, it is important to have a concreate strategy laid out early on. For example, ask yourself what the goal of your green energy procurement is. Is it operational savings or sustainability or both? Furthermore, how will you measure and verify the success of your procurement efforts? Properly defining your goals and developing a plan to reach them can be difficult.
Solution: Work with an energy and sustainability management company
An energy management and sustainability company (like EnergyWatch) can help guide you through deciding on a strategy. EnergyWatch understands the ins and outs of both operational savings and sustainability and can help you make a cohesive plan that reaches your energy and sustainability goals. Additionally, EnergyWatch’s software, WatchWire, can help you measure and verify the impacts of your green energy procurement.
Challenge #4: Identifying a project
Even once you settle on a strategy that works for your company, it can be hard to know where to start. There are many ways to procure green energy, like DERs, renewable energy credits (RECs), power purchase agreements (PPAs), green tariff programs, and more.
Solution: Do your research (and when in doubt, ask a third party)
The best way to ensure you are selecting the correct energy procurement method is to fully explore and understand your options. Click here for a list of helpful resources. A knowledgeable third party can also help you make sense of your options.
Other Challenges (and Their Solutions)
Outside of the PwC survey, here are more road bumps to keep in mind:
1. A lack of flexibility with respect to technology and financing options.
For many companies, it is most beneficial to employ more than one method of green energy procurement across their portfolios (e.g., onsite solar generation at one facility and a PPA at another). However, many renewable energy suppliers favor specific technologies and/or financing solutions and push them on their customers. While some operators may be willing to be flexible, they lack the resources to do so. This means organizations that wish to use more than one type of green energy solution need to contract with multiple parties, all utilizing different technology and processes. This often leads to a misallocation of time and resources.
Solution: Utilize energy management software
A proper energy management software will act as a single source of truth for your green energy procurement sources. It can store all the necessary generation data to ensure performance is meeting what was contracted. EnergyWatch’s software, WatchWire provides one centralized platform to consolidate all renewable production across multiple sites and vendors. Watchwire is vendor agnostic, delivering either a lagged or real-time data integration.
2. External conditions
Utility rate changes and transient government incentives can make or break your green energy procurement project. Thus, they need to be tracked diligently to ensure the timely execution of your plans.
Solution: Employ an outside specialist
For such industry-specific knowledge, it is best to turn to a third-party rather than waste your valuable time trying to stay abreast of changes in the energy industry. A third party that not only knows the ins and outs of the energy industry but is able to assess, organize and mobilize a network of providers across your portfolio can dramatically streamline your green energy procurement process and ensure that renewable energy commitments are met at the right time and at the right price.
How EnergyWatch Can Assist with Green Energy Procurement
The process of understanding and managing all the moving parts of energy procurement can be complex and tedious. We suggest working with third-party that is impartial, truly understands the markets and has your best interests in mind. An EnergyWatch consultant can help simplify the green energy procurement process and identify potential opportunities for commodity savings.
Additionally, your energy procurement strategy needs to align with overall facility operations, and your energy rate consultant should understand how to structure contracts for demand-supply optimization. Proper structure and timing of electricity supply contracts can result in hundreds of thousands of dollars in additional supply-side savings / or cost avoidance. EnergyWatch makes it easier by providing market expertise and ensuring supply contract decisions are optimized for future operations at your facility. To learn more about how EnergyWatch assists with energy procurement, watch our webinar, Managing Supply Rates for 2021 Budgets.