Deloitte's Steps to Assessing Renewable Energy Purchasing

As the global focus on reducing carbon emissions grows, organisations are starting to use renewable energy procurement as a crucial part of their strategic operations.

Beyond supporting sustainability goals, a well‑structured renewables procurement programme that aligns with operational demands can deliver lasting value, enhance competitive edge and build trust among stakeholders.

Key insights on renewable energy procurement

For procurement leaders determined to embed sustainability at the core of their corporate strategy, the evolving energy landscape offers both challenges and opportunities. 

Starting with an inclusive and strategic renewable energy plan is vital for aligning procurement strategies with supply chain resilience, ESG objectives and regulatory expectations.

Achieving longstanding value in renewables requires linking procurement strategies with operational necessities and emission reduction goals.

Deloitte offers five insights and recommends five actions for procurement leaders seeking to secure long-term value from their renewable energy programmes.

Five things businesses should know

1. The escalation in decarbonisation demand
   There is intensified pressure to fulfil renewable energy objectives. The increase in demand has led to the procurement of 109 GW of clean power globally via power purchase agreements through the end of 2021.
2. Emergence of new financial and incentive mechanisms
   These tools are advancing the expansion of renewable and other green technologies. US federal policies such as the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) provide incentives and funding to promote the production and investment in renewable electricity and grid infrastructure to reduce emissions.
   
3. Impact of Virtual Power Purchase Agreements (VPPAs)
   VPPAs are becoming a leading procurement pathway, covering 12 GW out of 17 GW total PPAs in the US during 2021. They provide flexible, long-term agreements assisting buyers in meeting sustainability objectives without the need for capital investment, offering a straightforward approach to renewable procurement.
   
4. Benefits and risks comprehension
   Organisations should form a clear, extensive vision of their renewable ambitions before choosing the appropriate procurement pathways.
   
5. The importance of tax and accounting factors
   In reviewing priorities, organisations should consider how tax and accounting factors can enhance value and create an effective energy procurement strategy.

Actions to undertake

1. Develop or reassess your renewable energy strategy
   Gain a clearer understanding of your organisation’s climate targets. Ensure steps are in place to reduce emissions and enhance ESG reporting transparency.
2. Identify climate initiative incentives
   Examine applicable incentives for current or planned initiatives, considering legislative adjustments for future planning. Engage a subject-matter expert (SME) to optimise tax credits and incentives for climate-focused projects.
3. Assess current and future electricity requirements
   Delve into evolving energy market dynamics to evaluate procurement options, weighing benefits, challenges, costs and feasibility.
4. Prioritise organisational objectives
   Align priorities against various procurement profiles, looking at options availability, lifecycle cost implications, price volatility and contract commitments.
5. Engage tax and accounting SMEs
   Collaborate with professionals to detect additional considerations and risks shaping renewable procurement choices.