Renewable energy procurement: strategies for UK organisations
Achieving net zero by 2035 in the UK requires a reliable, resilient, decarbonised electricity system and substantially reduced reliance on imported fossil fuels. How organisations procure electricity plays an important role in signalling demand for renewable energy, storage and technology that enables businesses to demonstrate environment, social and governance (ESG) priorities.
From built environments to energy suppliers renewable energy procurement is essential as we move towards a sustainable future.
Renewable energy sources in the UK
Increasing renewable energy sources available in the grid decouples the price of electricity from the wholesale price of gas and fossil fuels and supports the clean energy transition. Storing energy and relying on a variety of renewable energy sources will enable renewable energy to feed the grid during peaks and troughs in demand and supply. Options for renewable energy in the UK include:
Solar
Solar is easily deployable, enabling buildings to generate renewable electricity on-site for self-consumption. In 2024, one in 20 UK buildings currently carries solar panels, from garden sheds to commercial infrastructure, according to Solar UK.
Hydroelectric power
Renewable energy can be stored as hydroelectric power or generated by hydroelectric systems. When there is surplus power from other renewable sources, water can be pumped uphill to a reservoir. Then when a shortfall in power occurs, water is released, driving a turbine to generate power. Likewise to generate electricity, turbines in rivers or streams can generate renewable energy.
Wind
In 2023 wind farms produced a fifth of the UK’s energy, with a total installed capacity of over 30GW, mainly installed offshore. Wind power is crucial to the realised 40% reduction in CO2 emissions for the power sector since 1990. However, new wind power infrastructure faces environmental challenges including site selection to minimise impact on ecosystems and shutdown-on-demand to protect birdlife, particularly during migration.
Investment in floating wind farms will be key to the growth of this renewable energy source. Offshore wind farms reduce visual impact, benefit from stronger winds and therefore greater energy production and can be built at a larger scale.
Biomass
In 2023 biomass was the second largest source of renewable energy in the UK, generating 12.9% of the electricity supply. Biomass is simply material with biological origin, and use must comply with strict criteria to meet low carbon requirements. Bioenergy with Carbon Capture and Storage (BECCS) is an engineered greenhouse gas removal technology that captures and stores CO2 from biomass, producing low-carbon energy including electricity, heat, hydrogen and biofuels. It is not currently available in the UK.
Geothermal energy
Geothermal energy is energy stored as heat at a depth of a few meters to several kilometers below the surface of the solid earth. It provides reliable, constant, low-carbon, renewable heat in all weather conditions. Only a small fraction of this scalable resource is currently used in the UK, and there is potential to reduce reliance on gas for heating using geothermal energy.
Four strategies for renewable energy procurement
Energy consumers can procure electricity through the wholesale market, via direct contracts with energy companies, or using self-owned generation. A direct contract with the energy generator allows prices to be set independently of the wholesale market.
Managing procurement risks with a solid understanding of energy sources and supply options is key to meeting ESG goals while solving for cost-effective, reliable and renewable energy.
Power purchase agreements
A Power Purchase Agreement (PPA) allows prospective buyers to secure funding from external investors. The electricity user of the ‘off-taker’ (the building owner or user) agrees to buy power generated by the solar system paid for and owned by the investor, for a specified period, often 10-15 years.
A ‘private wire’ PPA means the power is produced and consumed on the same premises. Third-party capital covers the cost of the project, with the investor receiving a share of the savings a business makes on power costs. This revenue stream covers the costs of installation and maintenance and provides a return.
Renewable energy certificates (RECs)
Renewable energy certificates (RECs) are electronic certificates issued to energy suppliers to verify that their energy comes from renewable sources. The goal is to improve accountability and transparency for energy generators supplying Britain’s national grid, promoting renewable energy implementation, research, and development. The Office of Gas and Electricity Markets (Ofgem) is the independent energy regulator and issues RECs.
A Renewable Energy Guarantees of Origin (REGOs) certificate is issued for every megawatt-hour (mWh) of energy produced from an accredited renewable source, including solar, hydroelectric or wind. These certificates provide evidence of the renewable energy sources within a supplier's fuel mix disclosure, providing transparency to consumers.
Renewables Obligation Certificates (ROCs) represent the age and reliability of renewable energy sources. Older technology like offshore wind installations receive two ROCs per MWh while newer, efficient systems tend to receive more. This certificate incentivised energy generators to develop and adopt new and reliable renewable energy technologies, but closed for new generating capacity in 2017.
How organisations can use RECS to procure renewable energy
These certificates support renewable energy procurement by enabling informed decision-making. Choosing a supplier that aligns with sustainability targets allows organisations to report a smaller carbon footprint where power is matched with RECs, and approach net zero targets. RECs allow businesses to procure green power without the investment of installing and maintaining renewable energy infrastructure.
Direct investment in renewable projects
Investing in renewable energy by setting up renewable power generation to supply an organisation’s needs may suit large organisations with access to land, leases and investment capital. Generating electricity for self-consumption helps to build resilience within the organisation, reducing market exposure and risks from grid failure.
Organisations may invest in green energy by purchasing shares in renewable energy projects as part of their ESG strategy.
Community Choice Aggregation (CCA)
Businesses and local residents purchase electricity from a locally controlled public agency which operates on behalf of the member communities. The community benefits from tailored programs and services, social equity and economic and workforce development opportunities. Communities control where electricity comes from and how the money is spent.
Three principles for quality renewable energy procurement
Renewable energy procurement can be assessed by three principles, with a focus on onsite generation and the capacity to flexibly respond to intermittent availability of renewable power.
1. Renewable sources
Procurement should maximise the proportion of energy from renewable sources, associated with RECs.
2. Adding to or supporting renewable capacity
Quality renewable energy procurement creates additional capacity or supporting infrastructure to enhance renewable energy use into the future, reducing emissions at the systems level.
3. Time-matched consumption
Electricity consumed should match the timing of renewable generation at hourly resolution, or better.
Case study: streamlining renewable energy transactions
Chandi Ruparelia, Head of Legal at Island Green Power, uses Ansarada to manage deals and development planning to bring order to the implementation of solar energy in the UK. Bringing key stakeholders together with information on the expected project outcomes, benefits, and delivery process enables commercial outcomes to be realised. Structured data enables clear reporting against company, local and national green initiatives and measures progress towards targets.
Future trends in renewable energy procurement
Digital technologies will play a role in optimising operations and reducing maintenance costs. Improvements in infrastructure design will open new areas for renewable energy growth, and advancements in energy storage technologies will address intermittency issues. In turn, the demand for clean energy to power AI data centres will continue to increase.
By 2030, offshore wind capacity is expected to reach 40GW, and the goal is for solar to deliver 70GW by 2035. Built environments will self-supply more of their power requirements and the electricity grid will become more complex as storage options expand.
The path forward to renewable energy requires streamlined procurement processes
Streamlining renewable energy procurement is a key first step to enabling organisations and governments to cut through the complex landscape of renewable energy. With better visibility over their energy requirements and supply options, organisations can procure cheaper and more reliable renewable energy.
From raising capital for renewable energy projects to managing procurement processes end-to-end, Ansarada’s Procure platform provides end-to-end management for feasibility studies and energy procurement.
Level up your procurement strategy with Ansarada
Frequently asked questions
What is the energy procurement process?
Energy procurement begins with assessing an organisation’s energy needs and patterns of consumption. Energy supply options are evaluated, comparing investment of local renewable energy and/or local energy storage with grid supply options. Options available are assessed for price, reliability, sustainability and ESG principles. Once the mix of energy supply is decided, contracts are negotiated and delivered.
What is RFP for renewable energy?
“Request For Proposals” or RFP is a document issued to energy suppliers which defines the scope for the procurement of renewable energy and outlines energy supply needs, including average and peak usage.
Energy suppliers will respond to the RFP, and the organisation evaluates responses, asks follow-up questions and decides which supplier to contract with. From here, the ongoing supplier relationship is managed to meet energy requirements.
Why is energy procurement important?
Energy procurement ensures value for money and an adequate power supply for organisations, governments or businesses. As sustainability becomes a central success measure for corporations and governments, a sound renewable energy procurement strategy is key to meeting ESG goals.