Did you know that you can save costs by unbundling the purchase of RECs from your electricity supply? You can potentially save more by acquiring RECs independently from your electricity. Unbundled RECs can provide you with a cost-effective, flexible means to support renewable energy development and meet your sustainability goals, even if clean energy products are unavailable locally. By purchasing RECs, you don’t need to alter your existing electricity contracts.

Don’t be limited by buying “green energy” with your electricity contract and be pressured to pay more. AECO Energy’s SustainPro will help you to separately purchase internationally certified RECs to enable you to save more. Choose to buy long-term, fixed price RECs and have the freedom to choose your electricity of choice.

SustainPro will empower your business to buy both the best-priced electricity and the best-priced RECs to meet your sustainability objectives and to save your business more.

Save more with long-term, fixed price REC supply solutions from internationally certified providers and generators. SustainPro provides fixed cost, future REC supply contracts that can span up to 10 years, providing your business with improved long-term cost structures and improved profitability and planning. At the same time, you gain access to competitive and predictable REC prices. SustainPro provides certainty that your business will achieve its sustainability goals with a controllable hedge against unknown REC price movements.  

AECO Energy is a renewable energy specialist with direct relationships with renewable energy providers and generators. This results in low-cost RECs without the need to deal with legacy electricity retailers and network operators. AECO is a lean and focused provider revolutionising long-term purchasing of REC supply agreements.

Meeting your sustainability goals using a Nobel Prize procurement method – SustainPro Virtual Power Purchase Agreement

A Virtual Power Purchase Agreement (VPPA) has been a popular instrument in advanced electricity markets such as the United States, Europe and Australia to help businesses obtain long-term, fixed price renewables. VPPAs are designed to protect businesses against future price increase of renewables without having to be tied up with electricity contracts which are still limited by supply and hedging of traditional carbon-based markets such as gas, coal or oil.

AECO Energy’s SustainPro VPPA aims to provide renewable energy buyers such as RE100 companies, SGX-listed entities and any business that has ESG goals that are seeking to procure off-site renewable energy for long-term, fixed price renewable energy contracts independent from the supply of electricity.

What is a Power Purchase Agreement and a Virtual Power Purchase Agreement?

A Power Purchase Agreement (PPA) is a long-term contract to supply electricity. PPA normally has a contract length longer than the normal futures contract of electricity. In Singapore, these are more than 2 years while in Australia, these are 4 years or longer. They require the electricity supplier to guarantee the price without market hedges (a price premium) or they pass-on market variance to the customer (increase price stability risk) for a lower headline price. Companies who are willing to pay a premium to get long-term market electricity price certainty will benefit from a PPA.

A Virtual Power Purchase Agreement (VPPA) is a long-term contract for the supply of Renewable Energy Certificates (RECs) independently from the supply of electricity and the limitations of the electricity supply markets. VPPAs are normally longer than 2 years (the maximum life of one REC) and provide the producer of RECs and the purchaser of RECs long-term price certainty. Companies who want to remove price uncertainty for future REC purchases and reduce the risk from long-term REC price increases can benefit from a VPPA.

What is a SustainPro VPPA?

A SustainPro VPPA is an arrangement wherein a customer does not purchase physical electrons generated from renewable energy project(s) and only purchases the RECs from that project(s). A SustainPro VPPA is purely a financial transaction exchanging a fixed price for RECs. Since SustainPro VPPA is purely financial, the buyer still needs to meet its electricity load through traditional channels – therefore, SustainPro VPPA means the buyer’s relationship with its utility at the retail level remains unchanged (see Figure 1); i.e. SustainPro does not replace or interfere with your normal electricity contracts and supply arrangements.

FIGURE 1: Under a SustainPro VPPA, the buyer continues with its usual electricity consumption and procurement

VPPA designed for ASEAN renewables

In the past, PPAs are the dominant mechanism or form of transaction for the corporate renewable energy market in connected markets. This is mostly so due to companies’ large energy needs and their requirements to reach their renewable energy targets with a connected electricity network. However, with ASEAN and even Asia-Pacific without a widely connected network, the VPPA has gained prominence in the past years and is one of the fastest growing transaction structures today.

Customer benefits of SustainPro VPPA:

• Allows buyers and companies without trading experience to participate, a SustainPro VPPA can enable companies to quickly transition and progress towards their renewable energy goals.

• A diverse list of REC supplier offerings that customers can choose from and engage with to minimise supplier risks and reduce REC production variance across the region due to weather and/or climate impact on any individual REC supplier.

• SustainPro REC contracts give customers a guaranteed and committed amount of RECs each year with optional RECs at a fixed amount each year.

• SustainPro VPPAs are easily scalable and can enable buyers to satisfy a large portion of their sustainability goals with a relatively simpler and diversified nature due to its independence from local electricity supply contracts.

• Multiple SustainPro contracts can meet varying renewables requirements as your business grows and your renewables change.

• Annual REC surplus and shortages can be easily added or disposed with low-cost renewable brokerage from AECO which is built into the SustainPro contract.

SustainPro VPPA contract settlement using the 2020 Nobel in Economics: Milgrom-Wilson Reverse Auction Methods

Every SustainPro uses a process or method based on the 2020 Nobel Prize-winning auction process to obtain the prices and volumes between REC customers and suppliers. Using the 2020 Nobel Prize Milgrom-Wilson inspired auction process, SustainPro customers and suppliers establish a price and volume of committed and optional RECs over three pricing rounds in one day.

Each customer gets three opportunities to see the prices for the REC years they want to purchase and can change their requirements for each SustainPro REC year for every round. Each supplier sees the volume and prices reached for each round and can adjust pricing to obtain more commitment volume from the SustainPro round. At any time, the customer and the supplier can stop the process up until the last round when all volumes and prices are committed and contractually obligated.

This process ensures that each REC customer gets the best price they can get for every year and can only participate for the period of REC years they want for both committed REC amounts and optional REC amounts.

Example scenario of how SustainPro VPPA works

A company, DATACO, is a large, Singapore-based data centre company with commercial data centres in Singapore, Malaysia and a planned site in Indonesia. DATACO is pursuing to execute a SustainPro VPPA in order to meet its baseline renewables forecast for 5 years with options for future growth.

The SustainPro VPPA REC contract provides fixed prices to allow DATACO to achieve its RE100 goals and to differentiate its services making DATACO a responsible and sustainable company that can positively impact its brand image in Asia. The SustainPro contract is available for 10 years and DATACO can choose to participate in 5 out of those 10 years with both a baseline commitment and an option to add more RECS for each of those 5 years – each with a fixed cost.

SustainPro VPPA arrangement provides DATACO a simple bilateral contract between the buyer and AECO Energy with AECO managing the delivery of a variety of long-term REC suppliers packaged to supply DATACO’s renewable energy needs. DATACO can offer renewable energy to its customers at a fixed price in its offerings and provide product differentiation for the use of its facilities. The SustainPro RECs can be used in any of its data centres even in the yet-to-built Indonesia data centre with both fixed and optional REC to allow for growth in renewable use without being exposed to renewable market risks.

DATACO’s electricity supply arrangement remains unaffected. DATACO manages its own commercial electricity arrangements or it can use AECO’s Portfolio service to manage its traditional electricity contracts for any or all of its data centre locations regardless of the energy market.

In Figure 2, the bilateral contract between the buyer and AECO Energy was illustrated to visualise the engagement.  

FIGURE 2: The buyer guarantees a fixed price for power to the project, and receives RECs

What happens if DATACO’s SustainPro contract has excess or insufficient RECs in any year?

Should DATACO have excess RECs in any year, the SustainPro VPPA allows AECO to buy back and market those excess RECs for a competitive price than the current market. Alternatively, if more RECs are required during the 5 years, AECO Energy can ‘top up’ the contract for a fixed service fee.

DATACO’s purchase and use of the RECs can be counted towards their sustainability goals while selling them concedes that right. Unbundled RECs are traded separately from electricity generation.

Multiple layered SustainPro VPPAs can meet DATACO’s future renewable energy growth

As DATACO’s business grows, it can participate in future SustainPro offerings adding to its planned renewable usage. In a new SustainPro contract, DATACO can add more RECs in any year and use them in any of its locations across Asia. This gives DATACO a more planned and dynamic business expansion to allow the scope for renewables that match their customer growth and requirements.

SustainPro contracts with DATACO’s participation for committed and optional RECs for each year