Renewable Energy Procurement Through the Lens of Operations Management

Combating climate change hinges largely on the widespread deployment of renewable energy. In this chapter, we first set forth an overview of the various policies that are geared towards bolstering the adoption of renewable energy. In light of the policy background, we delve into the concept of renewable procurement and especially the procurement mechanisms that private corporations can use to meet their renewable energy goals. Building on this foundation, we survey the academic literature in the intersection between operations management and renewable energy research, offering a holistic view of how different aspects of the current discourse of the field affect renewable procurement effort by different actors. In particular, our attention turns towards an emerging trend among small to medium-sized firms: collective renewable procurement, which enables these firms to overcome the complexity and financial risk of undertaking a renewable energy project. Thus motivated, we introduce our recent investigations into collaborative renewable procurement. Our research delves into three mechanisms by which potential renewable energy buyers can establish power purchase agreement (PPA) contracts including separate, agent-based, and joint negotiation mechanisms. Our analysis reveals the impact of different mechanisms on the renewal project size in equilibrium as well as different players’ preference. Our results suggest that the rising number of buyers enhances the likelihood for adopting joint negotiations—a frequently observed mechanism in real practices, and that buyers’ perception of risks can harm the achievement of the sustainable goals, underscoring the dire need for more precise and dependable price forecasts combined with mechanism designs to mitigate risks.