Renewable energy solutions - Latour

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Contents

I. About South Pole

II. Overview Renewable Energy tools

III. Energy Attribute Certificates (EACs) and EAC+

IV. Power Purchase Agreements (PPAs) & virtual Power Purchase Agreements (vPPAs)

V. Onsite Development

VI. Offsets/ Carbon mitigation projects

VII. Your Climate & Renewable Energy Journey

VIII.Contacts & References

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Pictured: The Siam Solar Energy project in central Thailand helps reduce dependency on fossil fuels, improves energy access in rural regions and boosts local economies.

I. About South Pole

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Who we are

South Pole helps clients address climate change impacts, while mitigating risk and creating value on their sustainability journeys.

Global presence

We have advised on and established power purchase agreements

(PPAs) and Energy Attribute Certificates

(EACs) for 150+ projects in 24

countries

Diverse expertise

Based on all continents in 21 offices and in 18

countries. We are a team of 500+

sustainability advisors, scientists, and

engineers who are leading experts in

their fields

Innovative solutions

An award-winning, 15-year history of providing sustainability solutions

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Global experience, local knowledge

South Pole offices

Representations

Countries where South Pole has renewables experience

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II. Overview Renewable Energy tools

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Fulfill RE target & Reduce footprint Set an Renewable Energy (RE) roadmap, Implement it and deliver reductions

Direct procurement Advisory services

Advisory services Advisory services

● Needs analysis (define evaluation criteria)

● Tendering (RfP), project short-listing, evaluation

● PPA structuring, negotiation and contracting

● Define evaluation criteria● RfP process● Negotiation and contracting ● Certification and issuance

process

Onsite developmentoptimizes CSR potential:

● RE potential analysis across portfolio

● Site prioritisation● RfP process for suitable and

prioritised facilities● Third-party financing

arrangement, if applicable.

● Including: I-RECs, TIGRs, GoOs, RECs, J-Credits, LGCs, among others

● Premium label EACs available to increase impact

● Own EAC project portfolio

EAC

EAC+

PPA

OnsiteEAC+ have higher impact with a newly built projects:

Energy Attribute Certificates (EACs) directly, globally:

Power Purchase Agreements with cost saving potential:

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III. Energy Attribute Certificates (EACs) & EAC+

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• 1 EAC = 1 MWh of renewable electricity consumption

• By buying EACs, consumers can claim the environmental attributes of renewable power generation in a way recognised by all major sustainability reporting initiatives

• EACs are created at the point of generation and are traded together with (“bundled”) or separate (“unbundled”) from the underlying electricity

• EACs are quickly and easily deployed to meet targets in a credible, internationally-recognised and reportable way

Energy Attribute Certificates (EACs)An accounting instrument that reliably tracks MWh of renewable energy from their origin to one final consumer

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How Energy Attribute Certificates (EACs) workEACs trade separately from the underlying physical electricity, allowing buyers to purchase and claim green value quickly and credibly

Physical electricity that we receive through the power grid arrives without information on how or where it was generated. EACs are an accounting instrument which allow generation and use of renewable power to be tracked, ownership assigned and claims substantiated.

Company sources electricity from the local grid

Company buys an amount of EACs equal to their electricity consumption

By purchasing EACs, companies can claim the green attribute of renewable power generation

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EAC EAC

Fossil fuel power generation

Your business - Without EAC purchase

Renewableenergy generation

Your business -With EAC purchase

Power Pool

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Global availability of EACs

North American REC Market

EuropeanGoO

Chinese GECs*

J-creditsGECsNFCs

Australian LGCs

New Zealand N-

ZECs

* China has a national scheme, I-RECs and TIGRs

REC: Renewable energy certificatesGoO: Guarantee of OriginEAC: Energy Attribute certificates

National and/or regional scheme

EACs currently not available

&

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• Guarantees of Origin are a EU-regulated instrument that prove the source of renewable energy to consumers.

• Within EECS countries, certificates can be electronically transferred to any other EECS country for subsequent cancellation and proof of electricity consumption in that area*.

European Guarantees of Origin (EECS-

GOs)

• RECs are produced based on grid-connected renewable electricity projects in US states and Canadian provinces.

• RECs were developed primarily to meet the needs of state-level Renewable Portfolio Standards (RPS) and to serve voluntary RE market participants.

North American Renewable

Energy Certificates

(RECs)

• Australia has one of the oldest functioning renewable energy certificate markets in the world. • All certificate issuance is done on the Australian REC Registry, which is operated by the Clean Energy

Regulator which is a Federal Government Body.

Australian LGC Market

• Green Energy Certificates (GECs) can be used for national reporting on Greenhouse gas reduction, though availability of GECs is scarce.

• Japanese J-credits provide voluntary buyers with the option of retiring them as an offsetting credit or as a renewable energy certificate.

• Non-fossil Value certificates (NFVs) are the newest Japanese EACs and are based on the feed-in-tariff scheme and are traded on the Japanese Electrical Power Exchange.

Japanese certificates

Do not distribute.

Established EAC systemsRegulated national certificate solutions that are recognised by CDP and RE100

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EAC+

AdditionalityOnly supporting newly built power plants (not yet commissioned)

SimplicityA simple way to support local energy transitions without the complexity of classic PPAs

EAC price securityAs close to consumption as possible.

EAC+ is a medium-term contract for energy attribute certificates, exclusively focusing on newly built or not yet commissioned power plants which significantly contributes to making them feasible and helps to trigger the development and construction of the power plant. That’s what the “+” stands for.

EAC+ allows corporate consumers to reach their renewable energy targets with the following added benefits:

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IV. Power Purchase Agreements (PPAs) &virtual Power Purchase Agreements

(vPPAs)

How does a PPA work?

1. Companies sign long-term agreements agreeing to pay a fixed price (EUR/MWh) to a third party seller who agree to build, maintain and operate a renewable energy project

4. Companies receive energy attribute certificates and potential financial savings (virtual PPA) or energy (physical PPA) in return for their commitment

Do not distribute.

3. A renewable energy project is installed by the third party seller and delivers renewable electricity to the power grid

2. The long term contract and fixed price from a credible corporate offtaker provides the seller with the security to receive financing for the project

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● CO2 reduction targets● Sustainability reporting impact

and leadership● Additionality● Corporate social responsibility

(CSR)

● Price Competitiveness● Long Term Hedge● Security of Supply

Sustainability Procurement

Your drivers for a PPA

Do not distribute.

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Company and RE generator establish a

vPPA contract

vPPA - Transaction visualised

CfD payments

BuyerCompany

Company receives GoOs from the RE project

Power market

SellerRE Generator

Company continues to purchase

electricity from local supplier

Company’s local power

utility/supplier

Generated renewable

electricity is sold to the market

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2

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5

1

Do not distribute.

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vPPA - How it works 1. Company/ Buyer and the RE generator (Seller) enter into a vPPA contract, where Buyer

agrees to pay the Seller a fixed vPPA price for every contracted MWh of RE electricity generated by the project.

2. The Seller is responsible for selling the project output into the wholesale power market, receiving a market price for each unit of power sold.

3. The CfD settlement (Contract for Difference) is based on the offtake volume multiplied by the difference between the fixed vPPA price and the market price.

a. When the market price is higher than the fixed vPPA price, the developer pays the CfD settlement to Company/ Buyer.

b. When the fixed vPPA price is higher than the market price, Company/ Buyer pays the CfD settlement to the developer.

4. Company/ Buyer takes ownership of the GoOs associated with the contracted energy generated under the vPPA.

5. Company/ Buyer continues to meet its electricity supply through local power suppliers or utilities.

An illustration of the above process is outlined in the previous slide

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Do not distribute.

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V. Onsite Development

Onsite development

1. Companies either invest in power generation through capital expenditure (Capex) or an Operating expenditure (Opex) for long-term RE power supplyresulting in a fixed price (EUR/MWh)

4. Companies receive energy attribute certificates and physical power. Excess power can be sold into the power market and certificates can be monetized either in conjunction or separately.

Do not distribute.

3. A renewable energy project is installed on the premises and delivers physical renewable electricity directly to the company.

2. Investment through Capex makes the company the owner of the power generation facility whereas through Opex, development and supply usually comes from a third party

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VI. Offsets/ Carbon mitigation projects

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Offsets vs EACs

Offsets

- Non Reportable under GHG protocol, CDP, RE100

- Additional

- Commonly Scope 3 (May also be used for Scope 1 & 2)

- Certificates not bound to a specific region

- Unit: tCO2

EACs

- Reportable under GHG, CDP, RE100

- Not always additional

- Only Scope 1 & 2 (Direct emissions & Grid/ Indirect emissions)

- Certificates bound to specific region

- Unit: MWh

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Forest Protection: Avoided deforestation leads to maintained land management, resulting in avoided CO2 emissions.

Soil Carbon: Land management changes maintain or increase the soil carbon content.

Wetlands (inc. blue carbon): Restoration or construction of high carbon density, anaerobic ecosystems.

Afforestation/Reforestation: Tree growth takes up CO2 from the atmosphere.

Biochar: Waste biomass is heated at high temperatures to take a stable, high-carbon form, it is then reaches the soil for permanence.

Nature-based SolutionsForestry/Agriculture

TechnologicalEnergy/Industry

Different types of projects

Renewable Energy: Displaces power plants based on fossil fuels, with new renewable energy projects.

Efficient cookstoves & clean water: Cooking or boiling water on high efficient cook stoves replaces open fire pits, reducing energy use by up to 80%.

Direct Air Capture: CO2 is removed from the atmosphere and stored underground.

CO2 to Durable Carbon: CO2 is removed from the atmosphere and bound in long-lived materials.

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2

co

2

CO

2C

O2

Carbon Avoidance

Carbon Removals

CO

2

CO

2C

O2

CO

2

Both avoidance and removals

co

2

CO

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Climate action projects go beyond carbon and contribute to the UN’s 17 SDGs

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Mangroves protect the Honduras coastline from storms and act as nursery grounds for fish in Rio Platano Biosphere Reserve (Gracias a Dios state, East Honduras) covering the Karataska lagoon, Kruta river bar and cape Gracias a Dios. The territory is inhabited by the Miskitos indigenous community and benefits eight community councils.

Blue Carbon

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South PoleWhat is Blue Carbon?

MANGROVES> 67% of mangroves lost> At rate of 2% per year> Cover 0.7% of total land

TIDAL MARSHES> 50% of salt and tidal marshes lost > At rate of 1-2% per year. > Cover 140 million hectares

Protection / avoidance of loss of existing vegetation

Protection of existing vegetation

Protection / avoidance of loss of existing vegetationRestoration of degraded

areasProtection / avoidance of

loss of existing vegetationAfforestation & new

planting

Blue Carbon is CO2 stored in vegetation and soil of coastal ecosystems. When degraded or destroyed, they emit the carbon they have stored for centuries.

SEAGRASSES> 30% of seagrass meadows lost> At rate of 1.5% per year> Cover 0.2% of ocean floor, but store 10% of all ocean carbon

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Carbon neutrality today, net zero tomorrow

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2010 TODAY

“Business as usual” emissions

Ca

rbo

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ioxi

de

Em

issi

on

s in

ktC

O2/

yr

70

80

100

Residual Emissions Avoidance Projects

Net EmissionsRemoval projects

2070

Carbon Neutrality

today

Reduction / decarbonisation

Neutralisation

Residual Emissions addressed with Carbon Avoidance Projects

Residual emissions addressed with Carbon Removal Projects

Net Zero2050

Compensation

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VII. Your Climate & Renewable Energy Journey

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Your Climate Journey Renewable Energy as part of your Climate Journey

Understand your own and your suppliers’

energy consumption

Set ambitious yet realistic renewable goals

and develop a vision and strategy to increase

your impact, hedge against prices and

develop cost-savings over time with a mix of

the most suitable RE instruments

Purchase EACs to immediately achieve your ambitions and

implement the most suitable RE

instruments to operationaliseyour strategy

Finance renewable energy e.g. through on-site renewable energy or

invest in an energy access fund

Engage stakeholders and suppliers

on your renewable energy vision and

communicatethe results

Reduce footprint Finance climate

action Communicate

& lead

Define a roadmap &

create targets

Measure footprint & risks

Cli

ma

te J

ou

rne

yR

en

ew

ab

le E

ne

rgy

Jou

rne

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Define a roadmap & create targetsA vision and action plan to increase your impact, hedge against prices and save costs

Renewable energy solutions

SustainabilityRE solutions have environmental and social benefits. With renewable strategy, you can reduce your carbon emissions and prioritise solutions that provide highest emissions reduction potential.

Brand and climate leadershipBe a leader and not a laggard: achieve your international commitments (SBTs, RE100, net zero), enhance CSR efforts and align with the growing demand for companies to take meaningful action

Power price hedgeand reduction

The power market can be extremely volatile and power procurementcan be expensive. With the right decisions, at the right time, you can hedge against market risk exposureand reduce power costs.

Key takeaways

No matter if you set a RE or carbon reduction target, sourcing RE will help you to reach the target in an efficient way.

RE solutions, prices and regulation vary widely from country to country.

Markets are complex Right skill is needed forprocurement decisionswhen identifying the best mix of solutions for your company and for achieving your targets.

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RE

ImpactCost-savings

Low

High

Time

EAC+

PPA

On site

EAC

Starting point Target setting and roadmap Quick wins Increasing impact and cost-saving

An RE journey can unlock cost-saving potential and increase impact over time As you proceed on your renewable energy journey, you should diversify your procurement profile by sourcing not just through indirect methods but also direct methods, such as on-site generation or long-term agreements. This may deliver higher impact and provide potential cost-savings.

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Difference in terms of additionality and cost-savings potential

Note: The denser the tree the bigger the impact.

Green tariffsUtilities bundle power and EACs in one tariff

Unbundled EACsE.g. GOs, TIGRs, RECs or iRECs

EAC plusLong-term EAC off-

take agreement

Onsite renewablesRenewables on-

or near site

Corporate PPAsAn offtake contract

with a power generator

Carbon free electricityReduces scope 2 emissions

Cost-savings potentialThe potential to lower your power procurement costs

Ease of transaction Speed and transaction costs related to sourcing the solution

Power price protectionThe level of protection the solution provides against volatile spot market power prices

AdditionalityDoes the solution lead to additional renewable energy capacity in the grid?

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The business case for renewables is clear

Investments in RE or long-term RE offtake agreements can hedge against energy and commodity price rises and provide cost-savings in electricity procurement.

Talent

Price hedge

Markets

It is increasingly important to attract and retain top talent: almost 90% of business students think that sustainability is a priority, and 70% want to incorporate it in their future jobs.1

Your consumers are demanding it: 94% of consumers expect companies to be open and honest about what is in their products and have shown a willingness to pay up to 30% more for sustainable products.3 That’s even higher among millennials: 73% are willing to pay more for sustainability.4

Risk Mitigation

It is important to future-proof and mitigate against risk of all types, including regulatory, price and supply risks.

Sources: (1) https://www.naturalproductsinsider.com/sustainability/demand-sustainable-products-transforming-supply-chain, (2) http://climatecasechart.com/, (3) https://www.foodnavigator-usa.com/Article/2018/01/25/Consumers-increasingly-reward-sustainable-companies-punish-those-that-are-not-socially-responsible, (4) https://www.nielsen.com/us/en/press-room/2015/consumer-goods-brands-that-demonstrate-commitment-to-sustainability-outperform.html

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Communicate & lead

Disclosure & reporting

Supply chain engagement

Advocacy

Share actions and progress to meet compliance requirements and/or voluntary disclosure schemes

○ RE100/CDP○ Science Based Targets (SBTs) ○ Investor communication re

Bolster support and involvement with the sustainability agenda throughout your supply chain to demonstrate leadership and reduce scope 3 emissions

○ Engage your supply chain and collect data○ Map opportunities and incentivise and facilitate renewables

Leverage progress to inspire and mobilise other stakeholders via platforms, coalitions and alliance-building.

○ Encourage policymakers to make it easier to source renewablesat scale

○ Task force and industry group technical advisory

You can transform whole industries and reduce your scope 3 emissions by driving renewables through your supply chain.

Supply Chain engagement in order to reach RE Goals

Key takeaways

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VIII. Contacts & References

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Contact us

Offices & global representations:Addis Ababa, Amsterdam, Bangkok, Beijing, Berlin, Bogotá, Cape Town, Hanoi, Jakarta, London, Los Angeles, Madrid, Medellín, Melbourne, Mexico City, New Delhi, New York, San Francisco, Singapore, Stockholm, Sydney & Zurich

CEO South Pole Sweden &Head Climate Solutions Nordics

[email protected]: +46 702 74 17 62

Jens Olejak

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Our global team

Isabela de Villafranca

Arturo Mora Thaney Alamo

Mexico

Paul Hill Carolyn AddyAyca Tasli

London

Antonia Weitzer Matheus Monteiro Ab Kasmi

Amsterdam

Erick Ratajczak

ChiranjeeviChalamalasetty

Bangkok

Patrick Horka

Zurich

Yuhuan Shen

Beijing

Fadhila El Discha Umdatul Mujahidah

Jakarta

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We have supported these selected clients with renewable energy solutions

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Annex

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● Running renewable energy solutions workshops

● Facilitating corporate PPA workshops

● Defining suitabletarget(s) andbenchmarking peers and competitors

● RE solutions opportunity mapping across all regions

● Developing a global/national roadmap for sourcing renewables

● Scope 3 reductions by engaging your supply chain partners on renewables with our REPowering the supply chain initiative

We can support you wherever you are on your Renewable Energy Journey

● Providing credibleenergy attribute certificates (EACs)

● Managing corporate PPA tenders in developed and emerging markets

● Assessing on-site (solar) potential and running tenders

● Managing EAC+ sourcing for stronger additional claim with EACs

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