By: Adam Weber & Carmen Braggiato
May 4 2023
“Additionality'' is a term that the clean energy industry has borrowed from the world of carbon offsets. It means that a specific renewable energy project and its generation would not exist if not for specific actions taken, like signing a power purchase agreement or subscribing to a community solar garden.
As more companies enter the renewable energy space and seek to minimize their carbon footprint, the concept of additionality is more important than ever. The underlying impact of additionality can differ significantly between one solution and another. Recently, the legitimacy with which companies can address their greenhouse gas (GHG) emissions has attracted some scrutiny in the press and even on popular shows like John Oliver’s Last Week Tonight. Terminology should align with intentions to best achieve the overarching goal of using renewables – limiting global warming and mitigating climate change.
At Pivot, we hope to see a definition of additionality emerge that enables renewable energy buyers to more confidently make informed and meaningful decisions to support the generation of carbon-free energy. In this spirit, we have drafted a framework for additionality for the renewable electricity community's consideration.
It must be acknowledged that the successful development, financing, and construction of a solar array or wind farm requires countless individuals and organizations over a long timeframe. Slices of additionality for a new project could be attributed to (among many others):
No one party has an exclusive claim to additionality for any given project. Additionality is a shared endeavor (i.e., it takes a village), even if most of the publicity has focused on corporate offtakers embracing and claiming additionality.
Additionality is not binary. It is best measured on a sliding scale, and the value of a certain intervention can change over time as the industry evolves. To illustrate, below are three examples of tools with different levels of additionality that voluntary corporate buyers commonly use.
On the low end of the spectrum are “unbundled” RECs (those decoupled from the electricity with which they are generated). Buying unbundled RECs has been increasingly regarded with skepticism – despite remaining a credible means of neutralizing Scope 2 GHG emissions under the guidelines for corporate reporting and goal-setting like the GHG Protocol Scope 2 Guidance. To an extent, this makes sense. The volatile price of national Green-e RECs is unlikely to be the marginal input in a project developer’s financial model when calculating how well a given project will perform. However, the mere presence of such a price signal arguably confers some measure of additionality.
This signal was perhaps most important when non-hydro renewables first struggled to gain a toehold in the generation mix. Back then, any sign of support for the development of pricey wind and solar could have nudged more players into the arena. Now, the picture has changed. Technology cost curves have plummeted, projects can utilize many types of incentives, and, in certain places at some times, renewables can supply a majority of generation. In this environment, a few bucks per REC still literally holds some value ($11.45B in 2021 and rising according to S&P), but the associated additionality is much more diffuse.
That said, the purchase of unbundled RECs does serve another purpose that carries its own flavor of additionality. Buying them can help pave the way within a company toward using other instruments with higher additionality. For companies new to the space that are beginning their decarbonization journey, buying cheap RECs from the open market in simple one-off transactions represents a much lower barrier to entry than navigating the maze of financial, accounting, and legal complexities of, say, signing a Virtual Power Purchase Agreement (VPPA).
Somewhere in the middle of the spectrum lies community solar subscriptions. Subscribers do not often receive the RECs associated with their slice of the energy from a project, which prevents the ability to make claims about things like reducing Scope 2 GHG emissions. Nevertheless, not getting RECs doesn’t necessarily mean not achieving additionality. On the contrary, subscribers are vital to getting community solar gardens off the ground.
At the high end of the spectrum are the instruments that hinge on the involvement of one particular corporate buyer. Here Distributed Energy Resources (DER, aka onsite) are a sterling example of deep additionality. No one can argue with the impact achieved by enabling the installation of rooftop, ground-mount, or carport solar at a company’s own facility!
Ultimately, the focus should not be on attempts to exclude instruments with relatively low additionality but rather to acknowledge that they still hold some utility while emphasizing the need to switch to using instruments with higher additionality.
A clean energy buyer can boost the additionality profile of its endeavors by showing an investment of real resources and a willingness to diffuse project-related risk.
The investment of time matters. Engineering a purpose-built green tariff with a utility in a state with little renewables penetration may appear especially meaningful, compared to signing the next in a long line of PPAs with a wind farm in a windy state (although the latter remains unquestionably valuable!). In cases like this, there could even be second-order additionality. Once one company blazes a trail to a new market for clean energy, others may be able to follow more easily.
The investment of money matters. Buying long-term REC strips from projects still in development in emerging markets demonstrates a deeper level of commitment to the proliferation of renewables than buying RECs at rock-bottom prices from existing assets in mature markets.
The management of risk matters. Signing a contract with a project at an earlier stage of development that still needs to complete interconnection studies and secure approval for discretionary permits can provide a much-needed gust of wind in the sails to support that project’s case for securing project finance.
Finally, there is arguably more additionality to be won down the path less traveled. The cheapest, easiest, surest projects will almost certainly get swept up at some point along their journey toward being placed in service. Tougher projects are those more likely to be overlooked and thus more in need of support.
To fully understand additionality, we must first explain a relatively new term: emissionality. Emissionality means that not all megawatt-hours (MWhs) of renewable electricity are created equal. Rather, the impact on GHG emissions of those MWhs can vary widely depending on where and when they are generated. The concept has been gaining steam, as shown by the emergence of initiatives like the Emissions First Partnership, the 24/7 CFE Compact, and EnergyTag. Additionality and emissionality are complementary and interdependent. Additionality is a measure of whether an action will have an impact. Emissionality quantifies the degree of such impact.
Location, location, location. Where a project is sited plays a big role in that project’s emissionality. For example, signing a PPA with a project in a region still heavily dependent on fossil fuels will yield a much more significant impact on emissions per MWh than signing one with a project in a region already saturated with the same type of renewables. The opposite also holds true.
Supply and demand on the grid are constantly in flux, and consequently, so is the grid’s emissions profile. The time of day and season of the year when generation occurs are also at the heart of emissionality. Consider storage, a technology that does not generate renewable electricity on its own per se. A battery can suck up surplus solar energy in the middle of the day at a time of lower overall demand and then dispatch it when demand peaks, thus reduce the need to call on polluting peaker plants.
By linking additionality with emissionality, projects and clean energy buyers can greatly magnify their impact on the grid.
The focus of additionality has been almost exclusively on developing new generating capacity capable of abating GHG emissions. The scope of the concept could – and should – be extended to include any positive environmental and social (E&S) features added to projects that are discretionary and go beyond solely generating clean electricity. The options in this space are nearly limitless and include innovations such as agrivoltaics (sometimes referred to as ecovoltaics), Community Benefits Agreements, D-RECs, Social RECs, and Impact PPAs.
Conventionally, projects are sited, designed, and operated to comply with local, state, and national requirements for environmental preservation, resource conservation, and social justice (among others). Occasionally, a project may go above and beyond these minimum requirements if it provides an opportunity to gain community support and avoid opposition. These baseline efforts could be greatly enhanced if there were recognition for doing even more. Corporate buyers could work tri-laterally with project developers and local community/ecology stakeholders to provide additional resources to boost the E&S profile of projects.
Additionality is a term often in the limelight of the clean energy space, so let’s make its use more potent and intentional by giving it a clearer definition. At a minimum, that definition should recognize that:
Pivot is one voice among many in the industry, so we hope this sparks more dialog within the community. If you want to learn more or have thoughts about additionality, its importance in bringing new projects to life, and its connection to emissionality, please reach out to us at: email@example.com!
Together, solar and storage offer the unique ability to lower both demand and energy portions of a customer’s electricity bill.