Here’s how the RE100 updates could impact corporate renewable energy procurements

Corina Melchor, Clean Energy Advisor at Altenex Energy, discusses the updated RE100 technical criteria.

In the quest for decarbonization across their operations, corporations are increasingly setting more ambitious goals in their renewable energy procurements to meet their sustainability targets.

One such public commitment is joining RE100, a global initiative led by the Climate Group in partnership with CDP to drive change towards 100% renewable electricity. Once corporations join this alliance, they are free to set their own roadmaps towards achieving 100% renewable electricity across their global operations by 2040. Since the start of the pandemic, RE100 membership has almost doubled and is now at 380 member companies.

Within this framework, RE100 also defines credible sourcing efforts for renewable electricity as a way to equitably measure progress across geographies and market instruments. Every two years, the criteria are revised to ensure it is reflective of the current renewable procurement environment and market dynamics.

2022 Technical Criteria Update

Earlier this year, the first town hall meetings were held to revisit the technical criteria used by corporations towards this goal, with a year’s notice given before the scheduled criteria update in March 2023.

The agenda included three proposed measures:

1.  Consideration of the AIB (Association of Issuing Bodies) boundary as the market boundary for the European market. The AIB forum is used to promote the standardization of green certificates for European systems
2.  Acceptance of physical cross-market procurement under certain conditions
3.  Introduction of a 15-year limit on commissioning dates for considered renewable projects

RE100 received feedback throughout the summer and in October published the updated technical guidance on these three proposed measures – almost five months ahead of schedule. The expedited timing of this update could potentially be attributed to the current energy crisis in Europe, as it brings an additional lever to continue to incentivize new build in the region. As the next heating season (winter 2023/2024) could present further challenges, any changes well in advance are welcomed if they drive momentum around mitigation measures and incentives.

RE100 guidance will now align with CDP guidance and consider AIB as the market boundary for European footprint. Specifically, the country will be considered part of the European market as long as the country is in the EU single market, is an AIB member, and has a grid connection to another country that meets the first two rules.

The second item on the agenda was withdrawn from the proposed list of changes, as RE100 is not able to enforce the detailed mechanism to meet the conditions for physical cross-border procurement across market boundaries.

Finally, the guidance will now introduce a 15-year limit on commissioning dates for considered renewable projects. Corporations will now have to procure renewable electricity from projects that have been commissioned or repowered within the last 15 years. This limit does not apply to self-generation or if a corporation is the original offtaker and extends the contract. There is also a 15% global threshold under which corporations can source renewable electricity without adhering to these rules.

The effective deadline for compliance to these changes is January 1, 2024.

Altenex Energy generally supports these updates to the RE100 technical criteria, as it allows members to credibly source renewable energy with a demand that incentivizes new renewable capacities – something that is much needed in the current environment. While older renewable assets are still a valuable output for the grid, continued large purchases from these existing assets do nothing to alter the generation mix of the grid in the long-term. Enhanced coordination between RE100 and CDP guidelines is a positive development, and we are glad to see that clarity around renewable procurement.

While these changes are more restrictive for corporations on their renewable procurement journey, the updates will boost the ability of RE100 members to enact change to governments in the long-term planning of renewable electricity. In addition, participation in RE100 is a way for corporates to demonstrate global leadership, as these updates will drive new renewable electricity capacity and transformation of the grid.

Anticipated Impacts from the Updated Guidance

For corporations that are already aligning with CDP guidance, there is no change resulting from the updates to the first agenda item, as RE100 is now aligning with the more restrictive CDP guidance.

For corporations relying solely on RE100, they will now need to consider certain countries as distinct markets, notably the UK, Poland, Romania, Serbia, Bulgaria. For energy attribute certificates (EACs) for vintages 2022 and 2023, there will likely be little to no change, as the guidance will not be in effect until 2024. Beyond that, we could potentially see a price uplift in local EACs, as corporations are looking to draw solely from in-country resources. As more countries gain AIB membership and more physical links are created, the pool of asset buying could expand for corporates.

Overall, we expect to see more impact in the long-term stemming from changes to the third agenda item, as the 15-year commissioning/ re-powering date limit puts pressure on buyers and developers.

Specifically, the changes will mandate that retail suppliers to be more transparent in the products they offer and the lineage of these EACs. This disclosure will likely be challenging, as many retailers will find it difficult to map their EAC purchases to their sold offering.
It is important to note that the 15-year limit is technologically-agnostic, which could translate into a slight disadvantage for solar installations, as they entail relatively longer useful life and repowering considerations.

The changes could also result in impacts to a significant number of projects, including those that withdraw from governmental support systems early or after sunset of these subsidies.

An example are the post-EEG assets in Germany, which will likely become less attractive for corporate PPA buyers that are RE100 members, as these buyers will focus on new, scarcer RES projects in the region. As such, this change can separate the PPA market into newer, higher-priced projects for RE100 members and economically feasible existing assets for other corporate buyers.

A similar trend is playing out for Guarantee of Origin (GO) pricing across Europe. Beyond 2024 vintage year, Nordic GOs could show bearish signals, as most hydro assets were built before the 15-year term limit. The premium for EU wind and solar GOs could stretch beyond that timeframe.

The Takeaway

The new RE100 guidance aligns with the overall market trend of corporations seeking to place more stringent criteria on their renewable electricity purchasing and to transparently report their high-impact renewable purchases to avoid reputational risk associated with greenwashing. Such examples entail emissionality-the purchase of renewable projects in the areas where they are most impactful from a greenhouse gas emissions standpoint–or 24/7 carbon-free energy purchasing, where corporations match their consumption with their purchased renewable electricity on an hourly basis.

The updated RE100 framework, along with its increasing membership, serves as a model for the collaboration needed to achieve an economywide clean energy transition.

To learn more about the updates to the RE100 technical criteria or discuss your renewable procurement strategies in Europe, please contact please contact your Altenex account manager or reach out to our team via the form below.