Five Customers, Five Questions: Schneider Electric
Our third interview is with John D. Powers, Schneider Electric’s vice president of global renewables and clean tech. Discussions about greenhouse gas accounting all too often overlook the tremendous role of energy customers in driving grid decarbonization investments and the efforts of the people who make that clean energy procurement happen. The Clean Energy Buyers Institute has interviewed five energy professionals and asked five questions, to reveal insights and real stories about their hard work to advance the carbon-free energy transition. Customer perspectives are important for broader industry dialogues, particularly as World Resources Institute and the World Business Council for Sustainable Development update the Greenhouse Gas Protocol.
John D. Powers, Schneider Electric
Vice President, Global Renewables and Clean Tech
1. Could you share an example or two illustrating how and why carbon-free electricity (CFE) procurement is important for your company and for decarbonizing the grid?
Schneider Electric has our own Science Based Target and RE100 goal, and we also represent as an advisor hundreds of corporations that have or are setting similar goals, totaling many terawatt hours of annual electricity load. Procuring CFE (and ideally renewable CFE) is, along with efficiency measures, the most credible and achievable way to make near- to medium-term scalable impact on corporate carbon emissions.
The globe needs to immediately transition to CFE to stave off the worst impacts of global climate change, and demand from end users of electricity is and should be a key driver of that change. Schneider clients have procured over 15.5 gigawatts (GW) of new long-term renewable energy via power purchase agreements (PPAs) in the past 10 years on a purely voluntary basis. This has directly resulted in new wind and solar farms, on five continents, that would not have existed without this corporate demand.
2. How does the voluntary market system affect how you assess different CFE procurement options and ultimately make decisions?
For Schneider and our clients with voluntary carbon reduction goals, the market system is absolutely critical in terms of driving behavior. We and our clients need to know that there is a transparent and credible way to reduce our carbon emissions and receive credit for that without being accused of greenwashing.
Receiving credit for market-based Scope 2 emissions in greenhouse gas accounting directly drives renewable energy procurement activities, both in terms of long-term power purchase agreements (PPAs) or tax equity investments and also purchasing unbundled energy attribute certificates (EACs). EACs by nature are just meant to account for CFE from renewables and not necessarily drive change or enable new-build assets.
However, we have seen over the past few years that when EAC prices reach certain levels, the value of the EAC directly impacts the financial investment decision in building a new wind or solar project. In this way, they are starting to play a dual role of accounting for CFE, but also driving additionality or impact.
3. How do energy attribute certificates (EACs) and market-based accounting affect your decision making, and why?
See the answer to 2 above. EACs are fundamentally an accounting mechanism, and in that capacity, they are very effective. People sometimes want them to do more than that and drive impact, but this is not the primary role of EACs.
At Schneider, we encourage our clients to first ensure they can account for their CFE using EACs, but then whenever possible find ways to add impact as well. That can take the form of sourcing renewables from areas with a lot of coal production (higher local emission factors), or encouraging biodiversity or social justice within the renewable project, or matching usage 24/7 or signing a long-term PPA to get new renewables built.
These impacts should be celebrated, but separately from CFE accounting using EACs. And in cases where higher-priced EACs themselves drive new investment in renewables, that’s great! But we should not conflate impact with the value of EACs, which is fundamentally accounting one-for-one for each megawatt hour of renewable energy generated and added to the global electricity grids.
4. What advice would you give to companies that are just starting their efforts to procure carbon-free electricity?
Work with a great advisor of course rather than trying to recreate the wheel (whether Schneider or someone else). In addition, it is a good idea to understand what is available to you based on your size, location, credit and risk profile, etc.; formulate a strategy and set a goal. There are many ways to take the first steps toward CFE procurement and decarbonization in general, and we as an industry should encourage any and all end users to participate however they can and ramp up their impact over time.
5. If you could change one thing in today’s CFE markets to help your company go even further in decarbonizing the grid, what would it be?
More flexibility around market boundaries. Being too strict on where the CFE is sourced in relation to where the buyer has load can limit the available options (or the available affordable options) to do things like long-term PPAs. An example of this is where Europe used to be considered a single market from a Scope 2 accounting standpoint, but now only Association of Issuing Bodies (AIB) member countries are part of that market. That means that for corporates with load in the United Kingdom or Poland, for example, non-AIB countries, they need to do a local PPA to get Scope 2 credit. In many cases, there are not viable offers in those markets or other non-AIB markets.
If we were still in the “one European market” framework, buyers would up-size their virtual power purchase agreements (VPPAs) in viable markets like Spain or Italy to cover their load in the United Kingdom or Poland. Since no credit is given for this in the current structure, in practice buyers sign smaller deals and make a smaller impact.
It would also be helpful if buyers could over-size an EAC purchase in an adjacent market if the country where they have load does not have a credible EAC solution. We should not let perfect be the enemy of good and should encourage buyers to go as big as they can in viable markets while waiting for local markets to open up.
Read other interviews in our series.