100 percent green electricity with efficient energy procurement for companies

A sustainable power supply at attractive prices is becoming increasingly important for companies. Not least due to regulatory requirements, such as the Corporate Sustainability Reporting Directive (CSRD), many companies are obliged to comply with environmental standards. At the same time, electricity prices must not threaten profitability. A solar system is often the first step towards improving the ESG rating and becoming more independent from the electricity market. In combination with an energy storage system, the electricity generated can also be used when the sun is not shining. But what if your own solar system, including energy storage, is still not enough to guarantee 100% self-sufficiency? Then companies are still dependent on external energy procurement.

In this article, we present the most common procurement models for companies and explain the corresponding advantages and disadvantages. After an introduction to the fixed-price model, the tranche model, energy purchasing on the spot market, power purchase agreements (PPAs) and combined products, we draw a conclusion and tell you how you can get the most out of energy procurement.

To avoid a rude awakening when you look at your electricity bill, it is worth taking a look at the different components of the electricity price. Procurement and sales account for by far the largest share of the price. Then there are grid charges, taxes and other levies. While there is not much that can be done about the latter, there is huge potential in energy procurement in particular. For this reason, we take a closer look at the different procurement models in this article and tell you what you should consider. After all, there is a lot to look at when it comes to getting cheap green electricity.

In contrast to private households, companies have a wide range of options when purchasing electricity. We explain these in detail below.

The fixed-price tariff is the standard model for energy procurement at many companies. As with private households, the motto is: "Fixed price for a fixed period." Customers buy electricity for a longer period at the current price at the time of procurement. Although this gives the company peace of mind and planning security, it cannot benefit from falling electricity prices. The electricity sellers themselves also price in the risk of rising electricity prices. Companies therefore pay a surcharge when concluding the contract, which covers the electricity trader's risks. This means that the fixed price is often the most expensive option.

The tranche model promises a little more flexibility. Companies do not conclude a contract to purchase electricity on a specific date. Instead, the electricity is purchased in varying partial quantities (i.e. tranches) over time. This reduces the risk of buying electricity at an unfavorable time. The procurement risk is spread, allowing companies to benefit from more favorable market prices on average.

Electricity is sold on the spot market at the current price, which is determined by supply and demand. If a particularly large amount of electricity is available – for example when the sun is shining at midday and the PV systems are running at full capacity – the price is low. Conversely, the price can rise if no solar power is available at night. This means that companies can benefit from low electricity prices, but higher electricity prices also have a greater impact. However, a high level of expertise and close observation of the market is required to buy at the ideal time.

Power purchase agreements (PPAs) are concluded immediately with the operator of a solar or wind power plant. The customer buys the produced electricity at a contractually agreed price. Although electricity prices are usually comparatively low, the volumes are often high, which is why this model is particularly suitable for companies with high electricity consumption. Strong price fluctuations can be avoided in this way. At least when the sun is shining or the wind is blowing.

It is also possible to combine the various options for electricity procurement. For example, the base load could be covered by tranches or a PPA, while the peak loads, which are difficult to forecast, could be purchased on the spot market. This can be compared with a diversified investment portfolio: The stable, predictable returns from long-term investments are supplemented by dynamic, short-term investments that can react flexibly to market changes. This strategy makes it possible to ensure both stability and flexibility and to react ideally to different market conditions.

But how do I know whether the electricity I buy is actually sustainable? After all, a large proportion of electricity is still produced using fossil fuels such as coal and gas. As a result, the average emissions from the electricity generation are also high at more than 381 grams per kilowatt hour in 2023. To avoid buying “dirty” electricity, there are guarantees of origin (HKN) and green electricity certificates.

HKNs are particularly relevant for PPAs. To a certain extent, it is the birth certificate of a green electricity unit. It confirms that one megawatt hour (MWh) of electricity comes from a renewable energy plant and that the electricity has been fed into the grid. A HKN therefore shows that the electricity purchased actually comes from renewable sources.

Unfortunately, the purchase of HKNs is not without controversy. For example, HKNs are only issued for electricity without EEG subsidies and are therefore relatively rare in Germany. This is why many companies buy HKNs from abroad. But caution is required here. If the electricity comes from a hydroelectric power plant in Norway, for example, the electricity from the socket in Germany may actually come from a coal or gas-fired power plant. Our tip: Companies that purchase HKNs should therefore make absolutely sure that they originate from Germany and are generated in the same period in which the electricity is consumed.

A green electricity label is more meaningful. This is a quality seal that includes various pieces of information. It guarantees that the electricity provided by an electricity supplier to its end customers - depending on the label - comes either predominantly or entirely from renewable energies. The electricity must also meet additional criteria. These may include, for example, that the plants are relatively new in order to ensure the continuous expansion of renewable energies. Or it confirms that the plant is operated in a particularly environmentally friendly way, for example by using sustainably certified biomass. In summary: A green electricity label shows that the electricity is not only generated from renewable energies, but also has a positive environmental impact.

One thing is clear: the PV system on your own company roof is the cornerstone of a sustainable energy supply. Through the targeted use of energy storage systems, temporary bottlenecks can be bridged and renewable energies can be used even more efficiently. This reduces dependence on the electricity market and improves the ESG rating at the same time.

Unfortunately, electricity provided in this way is still not sufficient in many cases, which is why many companies are still dependent on external power procurement. But here too there are ways to secure cheap green electricity. With an efficient combination of solar power system, electricity storage and external procurement, 100 percent renewable energy is possible. Similar to an investment portfolio, risks can be minimized and returns maximized by combining fixed price, tranche, spot market and PPA products. Guarantees of origin and green electricity certificates ensure that the electricity from the socket really does come from sustainable sources.