Select Your Electricity Procurement Method(s) | Clean Power Hub

Select Your Electricity Procurement Method(s)

Of the handful of renewable energy procurement mechanisms discussed in Sections 2 and 3.4, you must select the most suitable option (or options) for your company.

Main Points

Based on the understanding you have gained on procurement options regarding financing options, policy landscape, business priorities and cost models, now you can select your procurement method(s).

First, Recall Various Procurement Mechanisms

Recall your primary procurement options and key components of each.

Next, Recall Key Financing Requirements

Recall the financing structures of on- and off-site purchasing options.

Turnkey Purchase: This is also known as “a CAPEX purchase” or “balance sheet financing.” Under a turnkey arrangement, a customer invests into and owns the solar PV system assets. Typically, turnkey purchases are either self-financed or a corporate loan from a bank may be an option if a customer has an existing credit line.

Third-Party Financed Lease, Power Purchase Agreement (PPA), or Rental: These arrangements are also known as “an OPEX contract,” “solar-as-a-service,” “solar Energy Service Company,” (ESCO) or “Build-Own-Operate.” Under a third-party financed structure, a customer does not own the solar assets directly. Instead, the solar vendor provides the financing and owns and operates the assets for the lifetime of the contract. Leasing contracts with solar vendors vary in length, but are typically 7 to 25 years. In some cases, a customer can have a “lease-to-own” option at the end of the contract, also known as a “Build-Own-OperateTransfer” contract. In the Philippines, a PPA is the relevant option for “Contestable” customers, or those that have average monthly demand of at least 750 kW. A lease is the applicable contract for “Non-Contestable” customers with demand under 750 kW per month.

Read Excerpt: Section 2 from Clean Energy Procurement Guidebook for the Philippines by CEIA.

Now, Read This

Your organization might have certain criteria that are important in the purchasing method, such as self-ownership, local visibility, or additionality. You must identify which procurement methods fulfill each criterion.

Next, See This

The key features of various procurement methods can help you to identify which method your company best aligns with.

Now, Consider This Example

If several procurement methods are of interest, you can procure energy from a combination of sources. For example, Nestlé UK and Ireland procures renewables from RECs, an off-site wind farm, and on-site biogas and solar installations.

Next, Look at This

A decision tree can help you narrow your options.

Now, Read This

On-site procurement options, whether via third-party PPA or turnkey purchase, rely upon certain fundamental requirements of the facility on which you would build the renewable energy project.

Finally, Align Your Procurement with Company Goals

It is important to prioritize your own company's goals to drive your procurement decision.

Suggested Actions & Next Steps

  • Decide: Given the information you have collected during exercises from previous sections, select your electricity procurement method from the options presented in Section 2 and Section 3.4.
  • Draft: Building upon the memo you started in Section 3.5, incorporate your final decision for the method of procurement and reinforce the arguments and details throughout. Discuss this memo with trusted colleagues, mentors or bosses. You will finalize this memo in Section 6.
  • Remember: Check back in with your utility and local authorities for any new policies that may affect this plan.
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