Climate clause

Landlord and Tenant Obligations to Create Additionality in Renewable Electricity Generation

Oisín’s Clause

A series of stepped options for commercial leases that help corporate landlords and tenants generate additional 'green' electrons for the electricity grid where their leasehold property is located.

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Why use this?

Oisín’s Clause provides step-down options for the corporate landlord and tenant so that they have multiple pathways to and opportunities for adopting it. Where one party provides evidence to the other that the higher ambition option is impractical and/or cost-prohibitive, the other party is then required to act reasonably in permitting the step-down.

The clause provides options for landlords and tenants who are willing to (and can) do more than procure REGOs/Guarantees of Origin to demonstrate their climate credentials.

Disclaimer - please read

The clauses on this website have been prepared in good faith on a pro bono basis and are free to download and use. The clauses have been drafted and edited by a variety of lawyers and, as such, the approaches to drafting may not conform to any particular drafting norms. We acknowledge this as a consequence of the collaborative drafting process.

The clauses on this website are provided on an ‘as is’ basis and without any representation or warranty as to accuracy or that the clauses will achieve the relevant climate goal or any other outcome.

This website do not comprise, constitute or provide personal, specific or individual recommendations or advice of any kind, and do not contain legal or financial advice. The clauses are precedents for legal professionals to use, amend and negotiate using their professional skill and judgement and at their own risk.

While care has been taken in the drafting of these clauses, neither The Chancery Lane Project nor any of its contributors owe a duty of care to any party in relation to their preparation and do not accept any liability for any errors or omissions, nor for any loss incurred by any person relying on or using these clauses or any other person. Users should use their own professional judgement in the application of these clauses to any particular circumstance or jurisdiction or seek independent legal advice.

At present, all the clauses are based on the laws of England and Wales. We encourage the conversion of these precedent clauses for use in other jurisdictions.

The clause

Additional Recital 

(A) [Consider including Eddie’s Recitals (Climate Recitals) here.]

 

Additional Definitions

100% Renewable Energy means an energy system where all the energy used is sourced from Renewable Energy Sources.

Annual Consumption means the volume of electricity (expressed in MWh) consumed [by the Tenant at the Premises]/[at the Property]* in any [calendar year].

* [Drafting note: Use ‘[by the Tenant at the Premises]’ for the Tenant’s obligation, and ‘[at the Property]’ for the Landlord’s obligation.]

Environmental Attributes means all of the attributes, characteristics, and other benefits associated with the generation of 100% Renewable Energy by a Renewable Energy Project and its displacement of conventional energy [(from fossil sources of energy)]. Such attributes, characteristics and other benefits shall, without limitation:

(a) include REGO Certificates, credits, benefits, reductions, offsets, allowances, green tags, or other transferable indicia, howsoever entitled, designated by an applicable renewable energy, greenhouse gas or similar program; and

(b) exclude any energy, capacity, reliability or other power attributes or any tax credits or benefits, including any investment or production tax credits, payments in lieu, or depreciation benefits.

Green Energy Tariff means a tariff charged by a Green Retailer to a customer for 100% Renewable Energy and (where applicable) REGO Certificates purchased by such Green Retailer.  If REGO Certificates are purchased by the Green Retailer they are retired by such Green Retailer with the Gas and Electricity Markets Authority and not sold to any third parties.

Green Retailer means an electricity retailer that purchases 100% Renewable Energy and (where applicable) REGO Certificates directly related to the generation of such 100% Renewable Energy from the relevant electricity market and/or directly from a Renewable Energy Project Developer.

Green Supplier means, as the case may be:

(a) a Green Retailer; or 

(b) a generator of 100% Renewable Energy.

Power Purchase Agreement (PPA) means a contract between the [Landlord]/[Tenant] [or its Affiliate] and a Renewable Energy Project Developer relating to either: 

(a) the physical sale and purchase of electricity from Renewable Energy Sources; or

(b) the provision of a price guarantee in respect of: 

(i)  a specified portion of the output of a Renewable Energy Project; and

(ii) the sale and purchase of Environmental Attributes associated with that electricity.

Property means [insert property address]. 

REGO means a renewable energy guarantee of origin issued by the Gas and Electricity Markets Authority in accordance with the Electricity (Guarantees of Origin of Electricity Produced from Renewable Energy Resources) Regulations 2003 (SI 2003/2562).

REGO Certificate means a Renewable Energy Guarantees of Origin certificate for all energy consumed within the Premises [or Property] and generated from a recognised source of renewable energy for which such certificates are available.

Renewable Energy Project means a project, whether in development or in operations, that generates (or will on commencement of operations generate) 100% Renewable Energy.

Renewable Energy Project Developer means a developer, owner and/or operator (as the case may be from time to time) of a Renewable Energy Project.

Renewable Energy Sources means naturally replenishing non-fossil sources of energy, including hydropower and tidal power, hydrothermal power, aerothermal power and geothermal power, wind, and solar* which are in each case eligible for certification by REGO Certificates.**

* [Drafting note: Consider specifically excluding nuclear and regenerative biomasses (wood, municipal waste, biomass and landfill gas, ethanol, biodiesel) in favour of naturally replenishing sources of energy. Energy generated by incineration emits significant quantities of greenhouse gases and other forms of small particulate air pollution.]

** [Drafting note: The Environmental Context section of the notes accompanying this clause explains why REGOs in the UK are not a straightforward guarantee of 100% renewable energy. This may change when the UK Government announces the outcome of its 2021 review (for more information on the review, see UK Gov, Government to tighten rules to stop ‘greenwashing’ of electricity tariffs (Aug 2021)). Users of this clause may want to amend the definition of REGO and REGO Certificate in case there are replacement or alternative schemes.]

[Drafting note: Capitalised terms relate to either a defined term in this clause or a defined term in the main agreement that this clause is designed to be inserted into.]

 

Additional Clauses 

Landlord’s obligations 

1. The Landlord shall:

1.1 procure that [100%]/[at least [●]%] of the electricity supplied to the Property during the [term] is 100% Renewable Energy using one or all of the procurement options in clauses 2.1 to 2.4; and

1.2 only enter into electricity supply agreements for the Property with a Green Supplier.

2. The Landlord shall procure the electricity supplied to the Property in clause 1.1 through the following procurement options: 

2.1 The Landlord shall install equipment capable of generating and/or storing 100% Renewable Energy on the Property.

2.2 If the Landlord explains and provides evidence satisfactory to the Tenant (acting reasonably) that procuring 100% Renewable Energy for the Property under clause 2.1 is impractical and/or cost-prohibitive*, the Landlord shall:

2.2.1 procure the installation of equipment capable of generating and/or storing 100% Renewable Energy outside of the Property. This includes the Landlord acquiring a whole or partial interest in a Renewable Energy Project. If the acquisition of such interest by the Landlord is partial, the output (in MWh) from such installation prorated to the relevant percentage ownership interest shall be not less than the Annual Consumption; and

2.2.2 enter into a PPA with the Renewable Energy Project Developer to purchase 100% Renewable Energy (in MWh) not less than the Annual Consumption (and associated Environmental Attributes) from the Renewable Energy Project in clause 2.2.1.

* [Drafting note: Where the Landlord and Tenant do not agree on the definition or scope of ‘impractical and/or cost-prohibitive’, they should refer to the dispute resolution mechanism or clause set out in the main lease agreement. If no dispute resolution clause or mechanism has been agreed or it is not adequate for resolving disputes arising under Oisín’s Clause, consider adding an appropriate dispute resolution clause to the primary lease to deal with this point. This drafting note applies to all uses of ‘impractical and/or cost prohibitive’ in Oisín’s Clause.]

2.3 If the Landlord explains and provides evidence satisfactory to the Tenant (acting reasonably) that clauses 2.1 and 2.2 are impractical and/or cost-prohibitive:

2.3.1 the Landlord shall enter into a PPA with a Renewable Energy Project Developer to purchase 100% Renewable Energy (together with a corresponding volume of applicable Environmental Attributes) that is not less than the Annual Consumption;

2.3.2 the Landlord may structure such PPA in the manner it sees fit, including on a virtual PPA or on a sleeved (i.e. through a Green Retailer) basis, if appropriate; and 

2.3.3 such PPA shall generate additional renewable energy capacity that would not have been generated but for the PPA. 

2.4 If the Landlord explains and provides evidence satisfactory to the Tenant (acting reasonably) that clauses 2.1 to 2.3 are impractical and/or cost-prohibitive, the Landlord shall pay a Green Energy Tariff to a Green Retailer.

Tenant’s obligations 

3. The Tenant shall:

3.1 procure that [[100%]/[at least [●]%] of the electricity supplied to the Premises during the [term] is 100% Renewable Energy using one or all of the procurement options in clauses 4.1 to 4.4; and

3.2 only enter into electricity supply agreements for the Premises with a Green Supplier.

4. The Tenant shall procure the electricity supplied to the Premises in clause 3.1 through the following procurement options: 

4.1 The Tenant shall install equipment capable of generating and/or storing 100% Renewable Energy on the Premises.

4.2 If the Tenant explains and provides evidence satisfactory to the Landlord (acting reasonably) that procuring 100% Renewable Energy for the Premises under clause 4.1 is impractical and/or cost-prohibitive, the Tenant shall: 

4.2.1 procure the installation of equipment capable of generating and/or storing 100% Renewable Energy outside of the Premises. This includes the Tenant acquiring a whole or partial interest in a Renewable Energy Project. If the acquisition of such interest by Tenant is partial, the output (in MWh) from such installation prorated to the relevant percentage ownership interest shall be not less than the Annual Consumption; and 

4.2.2 enter into a PPA with the Renewable Energy Project Developer to purchase 100% Renewable Energy (in MWh) not less than the Annual Consumption (and associated Environmental Attributes) from the Renewable Energy Project in clause 4.2.1.

4.3 If the Tenant explains and provides evidence satisfactory to the Landlord (acting reasonably) that clauses 4.1 and 4.2 are impractical and/or cost-prohibitive: 

4.3.1 the Tenant shall enter into a PPA with a Renewable Energy Project Developer to purchase 100% Renewable Energy (together with a corresponding volume of applicable Environmental Attributes) that is not less than the Annual Consumption;

4.3.2 the Tenant may structure such PPA in the manner it sees fit, including on a virtual PPA or on a sleeved (i.e. through a Green Retailer) basis, if appropriate; and

4.3.3 such PPA shall generate additional renewable energy capacity that would not have been generated but for the PPA. 

4.4 If the Tenant explains and provides evidence satisfactory to the Landlord (acting reasonably) that clauses 4.1 to 4.3 are impractical and/or cost-prohibitive, the Tenant shall pay a Green Energy Tariff to a Green Retailer.

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