Renewable energy like wind and solar power is a vital tool in the climate change fight, powering our world with sources that naturally replenish rather than limited, dirty fossil fuels. In a bid to increase the supply of clean energy in emerging markets, Salesforce is purchasing 280,000 megawatt hours (MWh) of renewable energy certificates over the next eight years.
The move will decrease the amount of CO² emitted into the atmosphere by over 50,000 tonnes every year, equivalent to 113 million miles driven by an average car or 9,000 homes’ electricity use for one year. It will also help unlock an estimated $65 million of investments in new solar capacity.
However, the most important element of the plan is that the Distributed Renewable Energy Certificates (D-RECs) will be restricted to small energy projects in emerging markets, regions still highly dependent on fossil fuels. According to Megan Lorenzen, who leads power sector decarbonization for Salesforce, nearly 95% of current corporate renewable energy purchases take place in North America and Europe. She adds:
“D-RECs are an evolution of that system but it’s specifically looking at aggregating distributed projects. Instead of Salesforce purchasing from one utility-scale solar project, what we’re doing is purchasing from a hundred very small projects, for example rooftop solar on a rural hospital. The D-REC allows a company like Salesforce to deliver that capital to projects that previously had no opportunity to access corporate purchasing because it was just inefficient for us to contract with so many small projects.”
Salesforce is teaming up with Powertrust, which co-founded the D-RECs scheme to find and fund clean energy projects in countries that have the highest CO2 intensity. Lorenzen explains:
Powertrust are one of two providers in the market today that’s doing this work. Their role is going out and finding the projects, contracting for the projects, and then there is a D-REC platform where all projects are reported into and validated to ensure the generation data is accurate. So we’re able to have confidence in this purchase despite it being a relatively new commodity because there’s a platform with a high-level of transparency, where we have the ability to validate the generation from these projects.
The benefits of the D-REC approach are two-fold: first, displacing the dirtiest fuels like diesel generators and coal with renewable energy; and second, offering investment to the most in-need communities. Salesforce’s contact with Powertrust stipulates that all the projects it supports should be located in either schools, hospitals, public service facilities or disadvantaged communities. Lorenzen says:
We were really intentional about where we wanted these projects to be located, and then we need to see outcomes associated with climate resilience and gender equality, so they’re looking for women-owned businesses. Powertrust will be building out this portfolio for us, and we’ll be able to vet it to ensure it meets those criteria that we outlined in our contract.
Potential projects include replacing old diesel generators with a solar-powered microgrid for a remote community along the Amazon in Brazil, reducing fuel consumption by more than 50% and benefitting around 1,000 people; a solar microgrid and micro-hydro installation in Borneo, to provide reliable energy to the 72% of rural Malaysians who lack access to electricity; a solar and storage installation at a hospital in Sub-Saharan Africa that will help improve electricity reliability for ventilators, organ support equipment and operating rooms, while controlling rising electricity costs; and a solar-powered microgrid in Nagaland, India, where an isolated mountain community will receive electricity for the first time.
While D-RECs can be purchased from existing projects, Salesforce is opting to direct its funding to new projects that will begin to launch later in 2023. Lorenzen explains:
We’ve outlined in the contract that for all the projects we’re supporting, Powertrust has to be able to prove that the project would not have been built without the revenue generated by the D-REC, essentially making all of these projects bankable when they otherwise would not have been built due to financing shortfall or lack of return for investors.
A risk associated with this type of investment is the potential for corruption: fraud like the double-selling of carbon credits or money being misused, and projects not fulfilling the agreed aims or being responsible for human rights abuses. By working with Powertrust, Salesforce feels confident it will avoid these pitfalls.
Working in some of these markets, we really wanted to make sure that we were avoiding any corruption risk. We’ve written a lot of protections and standards into our contracts, both for Powertrust and then for all their suppliers. They’re also going to be doing on-the-ground audits of these projects over the course of the contract. So we have a high degree of trust and visibility that these projects are built, and then they continue to operate over the term of the project.
According to the International Energy Agency, annual investment in clean energy needs to increase to $1 trillion by 2030 – a 3x increase from existing levels in order to reach global net zero emissions. Part of this requires billions of dollars spent every year on clean energy infrastructure in emerging markets to ensure equitable access to electricity. Salesforce’s D-RECs investment will help meet this goal, and is also a continuation of the firm’s broader sustainability strategy.
In its ‘More Than a Megawatt Hour’ paper, co-written by Lorenzen, Salesforce addresses how corporate buyers like itself can approach their procurement strategy with a focus on maximizing the environmental and social benefits of the energy transition. That includes job creation opportunities in any new large-scale project, how the community is being engaged, and whether the project is displacing the largest possible amount of emissions. Lorenzen adds:
We just released our climate justice principles, and it’s important for us that that’s not just lip service, but we’re backing it up with action. This is a very strong next proof point of not just our ‘More Than a Megawatt Hour’ philosophy, but also our climate justice principles in action.