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Net zero is transforming clean energy procurement

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"Net zero" is eating all other corporate climate language. 

Two years ago, I regularly saw headlines about corporate renewable energy targets in my daily diet of newsletters and PR pitches. Now those announcements are rare. Corporations are all about net-zero goals. 

While the name may be different, fundamentally the strategy is similar to earlier climate commitments: reduce emissions as quickly as possible. 

Corporate energy leaders can drive decarbonization in the power sector

Corporations have long been a driving force in spurring solar and wind installations. They’ve helped drive new procurement models that make clean energy accessible to more types of buyers and signal to the market that there is an appetite for renewable electricity. 

With corporations oriented towards net-zero goals, more organizations are considering the emissions avoided as a result of clean energy deals, rather than just counting the megawatts. According to the Renewable Energy Buyers Alliance (REBA), as the energy market has matured, so has the energy buyer mindset regarding the true impact of renewable energy projects with an intensified focus on optimizing carbon reduction.

This shift in thinking is one of the top procurement trends in REBA’s annual State of the Market report and is evident in the rise in net-zero commitments from companies including Microsoft, Wells Fargo, Netflix, PepsiCo, Bain and Co., Amazon, IBM, Nestle, General Motors and Google.

If the goal of purchasing renewable energy is to mitigate climate change, then it is critical to understand the greenhouse gas emissions benefits for individual projects. Where a project is can make a big difference. According to WattTime, a tech nonprofit that provides tools to better understand real-world emissions, corporate procurement teams could achieve 34 percent more emissions cuts by siting projects based on avoided emissions. 

For example: procuring electricity from a renewable energy plant being added to a portion of the grid that is heavily dependent on coal, displacing a high-emissions source of power. According to WattTime, a solar project in West Virginia would avoid three times the emissions as the same-sized project in California — simply because of the makeup of the grid. 

Corporations are also evolving procurement strategies to include more complex technologies, such as pairing projects with energy storage. Not only does adding batteries bring value to projects by storing power until the grid needs it, but this approach also could add clean energy to the grid during the times it is dirtiest.

These deals are being supported by the falling cost of this technology. Since 2010, energy storage has seen an 88 percent reduction in prices, making it a more attractive option in clean energy deals. In Q1, three of the largest renewables transactions included energy storage, with the developers citing decarbonization, resilience and enhanced value of the projects as motivators. 

Clean electricity is net-zero 101

Of all the sources of potential emissions reductions, decarbonizing the power sector is among the most straightforward. 

That’s not to say it will be easy. To run the power sector on carbon-free energy, we’ll need to deploy clean energy at record levels every single year for the coming decades. That will require navigating land use issues, supply chain pinch points and labor considerations. It also will require a diversity of resources, updates to the grid and the deployment of smart technologies. But, at a high level we know how to do it.

The International Energy Agency reflects the important role of the power sector in its scenario planning scenario, where electricity generation and distribution goes from the highest emitter to a negative emitter between now and 2070.

Chart on decarb

The Biden Administration is approaching this through the Clean Electricity Standard, a policy to transition the power sector to 100 percent by 2035. If that approach were adopted and the country continues to electrify buildings, industry and transportation, this would help cut 70 to 80 percent of the United States’ carbon emissions, according to climate policy expert (and VERGE Electrify keynote) Leah Stokes

How to get to net zero: offsets vs. reductions

At a high level, net-zero commitments are promising. They indicate organizations are considering their climate impacts holistically, instead of selectively shaving off emissions associated with specific parts of their operations. 

They’re also concerning. Organizations, by and large, don’t know how they will achieve their net-zero goals. Many rely too heavily on offsets or nascent carbon capture technologies. Many companies have mid-century goals, and more than half aren’t on track to meet them.

Climate activists have labeled many of these plans as corporate greenwashing, calling "net zero" "not zero" and saying these pledges are being used to disguise climate inaction.

Often, they have a point. Any net-zero plan that is serious about addressing climate change must include rapid decarbonization.

So how should companies, communities and countries balance their strategy of offsets and reductions? 

One way to think about it is the sinking boat analogy: We’re on a boat (Earth) with a giant hole that is rapidly taking on water. If the boat takes on too much water (emissions), it will sink (climate catastrophe). You have two tools: bail water out of the boat or plug the hole. 

To make things more complicated, we haven’t yet invented a reliable bailing bucket. We’ve waited so long to admit we’re sinking, plugging the hole alone isn’t enough to keep us safe. But until we invent the bailing bucket, our best chance is to plug that hole. Fast. 

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