Renewable energy hedging for UK and Ireland businesses
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Renewable energy hedging has become a critical strategy for companies across the United Kingdom and Ireland. For corporate decision-makers, sustainability officers, energy procurement managers, and financial officers, understanding and implementing hedging strategies in energy procurement is vital. By leveraging Renewable Energy Guarantees of Origin (REGOs) in the UK and Guarantees of Origin (GoOs) in Ireland, businesses can ensure their energy consumption aligns with renewable energy goals. This approach helps stabilize energy costs and plays a significant role in achieving long-term sustainability goals.
In this article, we will explore why early hedging is essential, the financial and sustainability benefits it offers your business, and how it aligns with key environmental initiatives to reduce our global carbon footprint.
Navigating a volatile energy market: the need for early hedging
The renewable energy markets in the United Kingdom and Ireland are highly volatile, with fluctuations driven by factors such as weather variability, policy changes, and geopolitical events. These fluctuations can create uncertainty in energy costs, making it challenging for your business to plan and budget effectively.
For organizations in the UK, there is an additional layer of complexity when using Renewable Energy Guarantees of Origin (REGOs) to report reductions in Scope 2 emissions, particularly if they choose to follow CDP, SBTi, and RE100 guidelines.
Early hedging allows your business to lock in energy prices, protecting them from market volatility and ensuring predictable costs over time. For example, securing REGO certificates in the UK or GoO (Guarantees of Origin) certificates in the Republic of Ireland can ensure you get your electricity consumption is covered by renewable sources, thereby stabilizing energy expenses.
Aligning hedging strategies with sustainability targets
If you are an energy procurement manager or a financial officer, you know that early hedging is more than just a financial strategy—it’s a crucial step towards achieving sustainability objectives. By securing renewable energy contracts at favorable terms, companies can mitigate the risks associated with price fluctuations and ensure they meet their sustainability targets.
Organizations in the UK are required to use REGOs for reporting reductions in Scope 2 emissions according to CDP, SBTi, and RE100 guidelines. REGOs not only ensure 100% renewable energy usage but also align your energy consumption with your SBTi targets, demonstrating a strong commitment to reducing carbon emissions. This alignment is vital as more UK and Ireland businesses set ambitious greenhouse gas reduction targets and transition to 100% renewable energy.
Additionally, sourcing REGOs or GoOs can significantly boost your sustainability credentials. These certificates provide verifiable proof of your renewable energy use, enhancing your company’s reputation for environmental responsibility and positioning it as a leader in sustainability within the UK and Ireland markets.
Hedging with Power Purchase Agreements
Imagine a company based in the UK that is committed to reducing its Scope 2 emissions and meeting its sustainability targets. The company’s energy procurement manager decides to secure a long-term contract for REGOs through a Power Purchase Agreement (PPA). This agreement ensures that the company can purchase REGOs at a fixed price, providing protection against future market volatility.
By implementing this hedging strategy, the company achieves several key outcomes:
It can accurately forecast energy costs, leading to better financial planning and budget management.
It confidently reports renewable energy usage and emissions reductions, supporting its commitments to sustainability frameworks like SBTi.
This proactive approach not only provides financial stability but also strengthens the company’s reputation as a sustainability leader. In a competitive marketplace, where transparency and environmental responsibility are increasingly valued, this kind of foresight in energy procurement offers a significant advantage.
Tangible impacts and opportunities with ITMOs
Let’s take a closer look at some groundbreaking initiatives from ACT under Article 6.
Senegal has a bilateral climate agreement in place with Switzerland, there's a project underway that introduces stand-alone Battery Energy Storage Systems (BESS), as well as BESS integrated with renewable sources. These systems will offer multifaceted benefits to the Senegalese grid, including grid regulation and load shifting.
Ghana's ITMO venture is uniquely positioned to focus on clean cooking solutions as a part of its Nationally Determined Contribution (NDC) target. Recognizing the gap in rural outreach, this initiative is dedicated to promoting efficient cooking stoves in these areas. The goal is clear: to minimize greenhouse gas emissions in remote regions and bolster Ghana's climate protection strategies.
Partner with ACT to develop your hedging strategy
Now is the time to develop and implement a renewable energy hedging strategy that aligns with your business goals and sustainability commitments. By doing so, you will secure your company’s energy future while demonstrating your commitment to corporate responsibility and environmental stewardship.
Ready to take the next step in your sustainability journey? Contact us today to learn how we can help you implement an effective renewable energy hedging strategy.