Deloitte: How to Assess Renewable Energy Procurement

As the global drive to decarbonisation intensifies, organisations are increasingly recognising renewable energy procurement as a strategic imperative. 

Beyond ticking sustainability boxes, a well‑designed renewables procurement programme – tied closely to operational requirements and emission‑reduction ambitions – can unlock long‑term value, competitive advantage and stakeholder trust.

Strategic insights into 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 a comprehensive and competitive renewable energy strategy enables firms to align procurement with supply‑chain resilience, ESG targets and regulatory demands.

To achieve long-term value, renewables procurement programmes should be aligned with operational needs and emission reduction priorities.

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 push to decarbonise has accelerated demand for low-carbon solutions
   This has increased the pressure on meeting renewable energy targets. 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. New funding and incentive mechanisms are emerging
   These are catalysing the growth of renewables and other clean energy 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. Rising role of Virtual Power Purchase Agreements (VPPAs)
   VPPAs are emerging as a dominant procurement pathway. In the US, VPPAs accounted for 12 GW of the 17 GW of total PPAs in 2021. They offer flexible, long-term contracts to help buyers meet their sustainability goals via an efficient process that doesn’t require capital investment. As VPPAs can be accessed regardless of the local energy regulatory environment, they can provide a streamlined path to renewables procurement.
   
   
4. Understand the risks and benefits
   Before an organisation can decide which procurement pathways are best for them, they should have a clear and comprehensive vision of their renewable energy goals.
   
   
5. Tax and accounting considerations play a substantial role
   As organisations review their priorities, accounting and tax considerations help maximise value and implement an effective energy procurement strategy.

Five actions to take

1. Develop or re-evaluate your renewable energy strategy
   Better understand what actions your organisation is taking to meet its climate target. With the rising focus on transparency and environmental, social and governance (ESG) reporting, ensure your organisation is taking steps toward reducing emissions and has adequate reporting mechanisms in place.
   
   
2. Identify incentives for climate initiatives
   Look into incentives that apply to planned or existing initiatives, and review legislative changes to support future decision-making. Assign an internal representative or consult a subject-matter expert (SME) to ensure your organisation maximises tax credits and incentives for climate-focused projects and investments.
   
   
3. Evaluate your current and future electricity needs
   Consider evolving energy market dynamics to understand procurement options. Map the benefits, challenges, costs and overall feasibility of each option before proceeding.
   
   
4. Determine your organisation’s top priorities
   Compare them with different procurement profiles, assessing option availability, life cycle costs, price volatility and contract commitment.
   
   
5. Engage tax and accounting SMEs
   Work with established experts to identify additional considerations and risks that can shape the renewables procurement decision.

Explore the latest edition of Procurement Magazine and be part of the conversation at our global conference series, Procurement & Supply Chain LIVE.

Discover all our upcoming events and secure your tickets today.

Procurement Magazine is a BizClik brand