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Impact PPAs: Setting a New Bar in Renewable Energy Procurement

A renewable power purchase agreement is a terrific way for organizations to meet their climate goals in a financially prudent manner. However, it can be easy to forget just how involved of an undertaking building a wind or solar farm truly is. Developing a renewable energy project requires a substantial workforce, complex supply chains, ample raw materials, and significant land and wildlife considerations, all of which can be carried out in ways that either enhance or harm the equity and environmental outcomes associated with project development. More and more, corporate PPA offtakers are becoming increasingly deliberate and innovative when it comes to accounting for the human and environmental aspects of project buildout, and are seeking to maximize the good that comes from every piece of the process. Here at LevelTen, we call procurements that thoughtfully amplify the benefits their PPAs can produce “Impact PPAs.”

In our Q1 2021 survey of project developers on the LevelTen Marketplace, nearly seven out of ten respondents said they were actively working to improve their organizational practices related to environmental and social justice as a result of buyer demand for such measures. Nearly two-thirds of respondents said they had been asked by buyers about hiring and training local workforces to build their projects, 52% were asked how their land use practices went above and beyond “business as usual,” and 51% reported they had been asked to disclose the diversity statistics of their company. Many developers had also been asked about human rights protections in their supply chain, whether or not the materials they used could be recycled down the road, and their organizational GHG emissions.

It’s abundantly clear that many corporations that procure large-scale renewable energy PPAs are looking beyond just the expected financial performance or emissions impacts of their investment. And with good reason: vast socioeconomic inequalities and the ever-increasing threat of climate change clearly demand more from modern institutions. By thoroughly incorporating not only the financial, but also the human and environmental impacts of PPA planning, corporate offtakers are helping to ensure their own commercial success, while also benefiting the society and planet in which they operate. 

As typically long-term, large-scale endeavours involving many parties, PPAs procured in a thoughtful and thorough manner can have a truly outsized positive impact on the lives of every person involved. Renewable energy projects can create jobs for diverse workforces, reduce pollution in underserved communities, and be built in a manner that minimizes local ecosystem impacts. By including these factors in procurement decisions, corporations can create a ripple effect of positive change. 

To remain competitive, developers must now take a more holistic approach to project development, one that looks at all the people involved: from their own employees, investors, and customers, to the communities in which they choose to develop projects. Here are five key considerations for renewable energy procurement managers interested in adding an environmental and social justice lens to their PPA selection process: 

5 Key Considerations Regarding Impact PPAs

1. Understand Available Options

There are many ways companies can incorporate positive human impacts into their renewable energy procurement strategies. To maximize the positive outcomes PPAs can achieve, the best place to begin is simply to know the options available, and the aspects of a developer partner’s operations worth considering. The following list is far from exhaustive, but provides some fundamental aspects of a developer’s operations to consider: 

  • The diversity statistics of the company/equity in hiring practices
  • The use of local workforces to build projects to benefit local economies
  • The presence of human rights protections throughout the supply chain, and a reliable way to track and ensure such protections
  • Project siting practices that minimize local environmental and wildlife impacts
  • Recyclable project materials that can be reused upon project retirement
  • Organizational GHG emissions from the developer themselves

We also encourage anyone looking to procure an Impact PPA to explore the “More Than a Megawatt” whitepaper written by our friends at Salesforce for additional guidance in evaluating renewable energy projects that maximize the additional benefits a PPA can create.

2. Align Stakeholders From the Beginning

PPA procurement can be complex and involve many parties. When planning an Impact PPA, the process can become even more intricate, making it absolutely critical to ensure that your goal of maximizing positive impacts is made clear from the outset. Decide as early as possible which aspects of your PPA you’d like to prioritize. Perhaps a developer has higher GHG emissions than desired, but demonstrates exemplary hiring practices, provides good wages and benefits to employees, and cares deeply about community impacts. Will the parties involved be willing to forego further emissions reductions to promote the positive social impacts such a developer would bring? It’s important to bear in mind that you may not find the perfect “unicorn” PPA you may have originally discussed (a project that has everything you want: i.e., has high value, high impact, high carbon avoidance, etc.). You and your team should be prepared to discuss which aspects of your Impact PPA you’ll prioritize over others. Talking through these scenarios ahead of time will help expedite such decisions later on.

3. Make Your Intentions Known

According to LevelTen’s industry survey, the majority of developers are looking to bolster their DEI commitments and make internal improvements because of demand from corporate buyers. This is terrific news: it means the increasing prioritization of social good from corporations is driving real change in our industry. As social justice concerns from buyers continue to become increasingly normalized, so too will higher standards for equitable employment practices and supply chain transparency. Developers will need to continue looking into their diversity initiatives and social impacts to remain competitive — as long as buyers continue pressing them to do so.

We encourage you to clearly state that you’re prioritizing the ESJ impacts of your PPA during the procurement process. Doing so will have a ripple effect that extends far beyond the immediate project you develop, and contributes to a very real shift towards a more equitable world. Your voice in this truly matters, and can act as an important catalyst for social good.

4. Define the Shortlisting Process Before the RFP

With so many factors under consideration, it’s essential to enter the RFP stage with a fully formed process for determining your shortlist. Work proactively with your advisor to establish how this information will be collected from developers and used in the selection process, and know how your shortlisting process will work well in advance. What questions, exactly, will you ask in the RFP to ensure the details you’ve prioritized are communicated back fully and accurately by respondents? Clarity and thoroughness in your RFP approach can pay big dividends later on when seeking to maximize the impact of your PPA. 

5. Know How You’re Going to Track and Measure Success

After taking the extra time and effort to carefully select an Impact PPA, you deserve to let the world know about your exciting success. However, doing so simply won’t be possible without determining which metrics and data you’ll use once the project is operational to gauge and evaluate the impact of your investment. 

Define the success criteria for your Impact PPA early on, and be prepared to work in collaboration with your developer counterparty to create methods for documenting things such as the jobs created through the PPA, and who those jobs were created for. The more data you can pull from your Impact PPA, the better other corporations can understand and replicate your successes.

Today’s organizations are increasingly rising to the challenges posed by a world ready for a more sustainable and equitable future. More and more, developers are looking internally to create positive change on an organizational level, and corporate offtakers are seeking to contract with such parties more often. Procuring renewable PPAs thoughtfully and with an eye for maximizing social impact has a very real role to play in creating a better tomorrow, and with the continued efforts of businesses looking to maximize the good their energy decisions can create, Impact PPAs will continue to shift our industry in a more sustainable direction that improves the well-being of people around the globe. Here’s to a brighter tomorrow. 

Zach Starsia

Zach is the Director of Accounts at LevelTen Energy. His experience includes renewable energy development (solar, energy storage), energy development strategy, market analysis, PPA contract negotiation/execution and sales pipeline management.

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