PPAs: It Will Become Increasingly Difficult for Corporate Consumers to Be "Green"

Before long, life could become considerably more difficult for companies seeking the label of green electricity consumers. At least, if the update to the Scope 2 standard — put out for consultation on October 20 by the GHG Protocol, the body recognized as the authority on voluntary emissions-measurement mechanisms — enters into force in its currently proposed form.

Among the new requirements outlined in the consultation, which ends on December 19 and is expected to lead to publication of updated standards in 2027, two points in particular are seen as critical by corporate consumers. According to industry participants, these issues dominated discussions at the recent RE-Source event in Amsterdam, an international gathering dedicated to green procurement.

In the future, specifically, for companies to continue calling themselves “green” in front of customers and markets, corporate electricity consumers — typically big tech companies or major non-energy-intensive users like Ikea, Nestlé or P&G — may have to prove that the energy from their PPA contracts is generated in the same market zone where it is consumed and, even more complex, at the same time. Neither of these criteria is required today.

The goal is to make the connection between actual generation and consumption increasingly tight, in order to avoid greenwashing cases where the sustainability claimed by companies is only superficial, and to strengthen the overall environmental credibility and effectiveness of these instruments. Mikkel Kring, partner at ONE – Our New Energy, a consultancy specializing in the structuring and negotiation of PPAs – comments when speaking with Staffetta.

“Of course,” he explains, “meeting these rules means moving toward perfect correspondence between production and consumption. At the same time, it’s a major shift that makes things more complex and creates a barrier — one that some corporates might decide not to overcome.”

So far, the GHG standard allowed consumers in any country to be matched with generation in any other, enabling European companies, for example, to sign a single PPA covering all their facilities located in different countries.

“This approach has been a huge success — around 200 GW have been signed globally,” notes Kring, acknowledging that this trend could slow under the new rules.

Open questions in the consultation include whether the locational requirement should be mandatory (GHG currently proposes that it should), whether the new criteria should apply retroactively to already-signed PPAs — with a possible safeguard clause — options for gradual implementation, exemptions for small and medium-sized enterprises, and more or less strict mechanisms for satisfying the hourly-matching requirement.

How will it end? “Among the participants at RE-Source, there was great concern,” Kring adds, “also because this is still a consultation, and proposed exemptions could always be removed.”

As for the likely outcome, he concludes: “I see many good reasons to adopt a localization criterion, both from a sustainability and a price perspective. I think it will happen, and it’s a good idea. On the other hand, it could slow the market in the short term and require new solutions — but those can be found.”

A different matter is hourly matching: “I don’t think the time is right yet for a 24/7 model — the market isn’t ready.”

Furthermore, he concludes, “striking the right balance will require safeguarding already-signed PPAs with a grandfathering clause. Doing anything else would make no sense.”