---
title: Require Supplier to Procure Energy from Renewable Sources
excerpt: 
date: 2024-08-22T09:33:48Z
modified: 2025-07-23T11:29:20Z
file_type: md
permalink: clauses/require-supplier-to-procure-energy-from-renewable-sources.html
wpid: 5811
status: publish
type: clause
jurisdiction:
  - Australia
maintenance-status:
  - Not maintained
practice-area:
  - Commercial
  - Supply chain
sector:
  - Energy and natural resources
eleventyComputed:
  clause_child_name: "Lucy's Clause"
  clause_summary: A precedent clause for a supply agreement requiring the supplier or contractor to procure energy from renewable sources.
  clause_last_updated_date: 2024-09-10
layout: layouts/clause.njk
---

# Require Supplier to Procure Energy from Renewable Sources

## Child’s name

Lucy's Clause

## Summary

A precedent clause for a supply agreement requiring the supplier or contractor to procure energy from renewable sources.

## What this clause does

Using this clause will future proof contracts, avoid costly re-procurement (as the global mix of energy supply swings towards renewable sources), meet funder, customer or government procurement requirements (as the use of renewable energy becomes standard market practice) and help achieve emissions reduction and net zero targets.

## Clause Content

*\[Drafting note: Capitalized terms in the clauses below relate to either a defined term above or, where appearing in square parentheses, a defined term in the main agreement that this clause is designed to be inserted into (referred to in the clauses below as 'this Agreement').\]*

**Drafting Option A: Supplier not required to tender its electricity supply needs**

\[*Drafting note: Use with Suppliers or Contractors who are unlikely to run a formal tender process for electricity supply in relation to the contract. It is up to the Suppliers or Contractors to manage their costs efficiently to maintain a margin under the contract. If using this Drafting Option A, many of the additional definitions set out above will not be required. Delete Options B and C if using Option A.*\]

**1 Procurement of Wholly Renewable Energy**

1.1 The \[Supplier\] or \[Contractor\] must procure that \[100 (one hundred) percent\] or \[at least \[●\] percent\] of the electricity consumed by and or or supplied to it \[during the term of this Agreement or for use in the Contract\]\* is Wholly Renewable Energy.

\*\[*Drafting note: See Drafting note to Energy Procurement definition.*\]

1.2 The \[Supplier\] or \[Contractor\] will provide \[unequivocal\] evidence,\* satisfactory to the \[Company\] or \[Principal\], that it has satisfied its obligations under this clause \[1\].

*\**\[*Drafting note: Consider specifying what constitutes ‘evidence’. The strongest example here would be providing copies of RECs which are available to the Energy Supplier, as proof that the Renewable Energy Obligation has been met.*\]

**Drafting Option B: Supplier required to tender its electricity supply needs**

\[*Drafting note: Use only with Suppliers or Contractors who are required, or likely, to run a tender process for energy procurement for the contract. Delete Options A and C if using Option B.*\]

**1 Procurement of Wholly Renewable Energy**

1.1 The \[Supplier\] or \[Contractor\] must undertake the Energy Procurement in accordance with the terms of this clause \[1\], and the \[Supplier\] or \[Contractor\] will ensure that this clause \[1\] is replicated in the Energy Procurement tender documentation \[(and that the scoring matrix for the Energy Procurement has been developed in accordance with the requirements of this clause \[1\])\].

1.2 The Energy Procurement must include:

(a) a requirement that bidders submit at least one Renewable Solution to the \[Supplier\] or \[Contractor\], and that any bidder who does not submit at least one Renewable Solution will be disqualified from the Energy Procurement; and

(b) a scoring matrix to assess bidder compliance with the terms of the Energy Procurement.\*

\*\[*Drafting note: Consider whether there would be preferential scoring if a greater percentage of the Renewable Energy Obligation is offered.*\]

1.3 Within \[2 (two) weeks\] of the closing date for the Energy Procurement, the \[Supplier\] or \[Contractor\] will provide the \[Company \] or \[Principal\] with a summary of the bids received including:

(a) the price of electricity specified in each bid;

(b) in the case of each Renewable Solution, reasonable details of how that Renewable Solution complies with or exceeds the Renewable Energy Obligation;

(c) in the case of each Non-Renewable Solution, a confirmation that the relevant bidder has also submitted at least one Renewable Solution; and

(d) a comparison of the prices of Renewable Solutions against the prices of the Non-Renewable Solutions,

together with confirmation by the \[Supplier\] or \[Contractor\] of which bid it intends to accept (subject always to clause \[1.4\] and excluding any bid disqualified pursuant to clause \[1.2\]).

**Drafting Option B1: Supplier determines successful bid (within limits)**

\[*Drafting note: Use where less direct control by the Company or Principal over the Supplier or Contractor’s energy supply is appropriate (for example, where the Supplier or Contractor will be procuring energy for its general business use and for the benefit of multiple projects or customers).*\]

1.4 \[When making its determination as to which bid to accept, the \[Supplier\] or \[Contractor\] may only accept a Non-Renewable Solution where such Non-Renewable Solution is at least \[10 (ten) percent\] less expensive than the cheapest Renewable Solution received,\* and in such a case, the \[Supplier\] or \[Contractor\] may accept that Non-Renewable Solution without further discussion with the \[Company\] or \[Principal\].\*\*

\*\[*Drafting note: Consider the percentage levels overall given normal differentials and the desire to deter from non-renewable sources.*\]

\*\*\[*Drafting note: Consider when this assessment of price comparison should take place and whether it should be more than once (for example, upfront, after 12 (twelve) months, and so on). Additionally, determine the reference point for the price comparison. Note that cost may not be the only driver here. Credit support provided by the Supplier or Contractor and credit support that will need to be provided by the Company or Principal will be relevant considerations in assessing whether an offer should be accepted.*\]

1.5 The \[Company\] or \[Principal\] is entitled to submit comments to the \[Supplier\] or \[Contractor\] in relation to any bid notified to it pursuant to clause \[1.3\], and the \[Supplier\] or \[Contractor\] must accommodate any reasonable comments submitted by the \[Company or Principal\], provided they are not inconsistent with the Contractor’s rights under clause \[1.4\] when making its decision as to which bid to accept, \[provided that the \[Company\] or \[Principal\] has submitted its comments to the \[Supplier\] or \[Contractor\] no later than \[one week\] after receipt of the \[Supplier’s\] or \[Contractor’s\] notification.\]

**Drafting Option B2: Company controls bid selection (within limits)**

\[*Drafting note: Use where more direct control by the Company or Principal over the Supplier or Contractor’s energy supply is appropriate (for example where that energy will be supplied directly to the Company or Principal or used exclusively for a particular project).*\]

1.4 \[Where the cheapest Renewable Solution is:

1.4.1 the same cost, or cheaper than; or

1.4.2 up to \[10 (ten) percent\] more expensive than,

the cheapest Non-Renewable Solution, the \[Supplier\] or \[Contractor\] must accept that Renewable Solution \[at no additional cost to the \[Company\] or \[Principal\].\]\* or \[. In such a case, half of the resulting increase in the Contract Price will be borne by the \[Company\] or \[Principal\], and half by the \[Supplier\] or \[Contractor\].\]

\*\[*Drafting note: While it is fine upfront to direct that the supplier or contractor accept this, it is highly likely that any such additional costs will be passed through to the Company or Principal.*\]

1.5 Where the cheapest Renewable Solution is greater than \[10 (ten) percent\], but no more than \[20 (twenty) percent\], more expensive than the cheapest Non-Renewable Solution, then the \[Supplier\] or \[Contractor\] shall \[use its best efforts to\] or \[, acting reasonably,\] submit a proposal to the \[Company\] or \[Principal\] with supporting evidence, illustrating how the greater cost of the Renewable Solution will affect the Contract Price. The \[Company\] or \[Principal\] may then at its discretion:

1.5.1 accept the \[Supplier’s\] or \[Contractor’s\] proposal of the adjusted Contract Price and direct the \[Supplier\] or \[Contractor\] to accept the Renewable Solution; or

1.5.2 reject the \[Supplier’s\] or \[Contractor’s\] proposal of the adjusted Contract Price and direct the \[Supplier\] or \[Contractor\] to accept the cheapest Non-Renewable Solution.

1.6 Where the cheapest Renewable Solution is greater than \[20 (twenty) percent\] more expensive than the cheapest Non-Renewable Solution then the \[Supplier\] or \[Contractor\] may accept the cheapest Non-Renewable Solution without further discussion with the \[Company\] or \[Principal\], \[provided that this be reviewed within \[●\] months or an annual marketing exercise is conducted to compare the cost of the chosen solution against alternative Renewable Solutions\].

**Drafting Option C: For inclusion in Company or Principal’s Tender to Suppliers**

\[*Drafting note: Adapt Option A and/or Option C above to create a clause that can be added to the terms of the Company or Principal’s tender process for the contract. For example, Suppliers or Contractors could put forward a Contract Price based on a \[●\] percent of the Renewable Energy Obligation and a Contract Price based on a lower (or zero) Renewable Energy Obligation. The Company or Principal can then decide how important the \[●\] percent of the Renewable Energy Obligation is versus a lower Contract Price. It may be more efficient to do this upfront as part of the competitive tender process, rather than during the term of the contract. Delete Options A and B if using Option C.*\]

**Use clause 2 with all drafting options**

**2 Monitoring and audit rights**

***Option A – Use this option if the Supplier or Contractor has entered into a retail contract or has a 'Behind the Meter' solution***

2.1 \[The \[Supplier\] or \[Contractor\] shall \[every 6 (six) months during the term of this Agreement\] or \[if requested by the \[Company\] or \[Principal\]\] provide RECs or other evidence reasonably acceptable to the \[Company\] or \[Principal\] demonstrating compliance with the Renewable Energy Obligation\] or \[that:

(a) \[100 (one hundred) percent\] or \[at least \[●\] percent\] of the electricity consumed by and/or supplied \[during the preceding six months\] to the \[Supplier\] or \[Contractor\] was Wholly Renewable Energy; and

(b) \[100 (one hundred) percent\] or \[at least \[●\] percent\] of the electricity consumed by and/or supplied \[during the preceding 6 (six) months\] to each of its subcontractors and suppliers relating to performance of its obligations under this Agreement was Wholly Renewable Energy.\]

\[OR\]

**Option B – Use this option if the Supplier or Contractor has entered into a Power Purchase Agreement**

2.1 \[The \[Supplier\] or \[Contractor\] will ensure that the Energy Supplier is obliged by the terms of the Energy Contract to submit a report to the \[Supplier\] or \[Contractor\] \[(copied to the \[Company\] or \[Principal\])\] on the Energy Supplier’s compliance with the Renewable Energy Obligation. Such report must be submitted no less frequently than once every \[6 (six) months\] or \[year\] for the duration of the Energy Contract. The \[Supplier\] or \[Contractor\] shall ensure that it is permitted by the terms of the Energy Contract to provide a copy of the report to the \[Company\] or \[Principal\].\]

\[*Drafting note: See* [*Zoe and Bea’s Clause*](https://chancerylaneproject.org/clauses/green-supplier-agreement-terms/) *for template clauses relating to reporting obligations.*\]

2.2 \[The \[Company\] or \[Principal\] has the right to audit the \[Supplier\] or \[Contractor\], on reasonable notice, to verify that \[the Renewable Energy Obligation has been met\] or \[\[100 (one hundred) percent\] or \[at least \[●\] percent\] of the electricity supplied to the \[Supplier\] or \[Contractor\] and its subcontractors and suppliers relating to performance of its obligations under this Agreement is Wholly Renewable Energy\]. The \[Supplier\] or \[Contractor\] shall provide, and shall procure that its subcontractors and suppliers provide, such information as the \[Company\] or \[Principal\] may reasonably request to verify that \[the Renewable Energy Obligation has been met\] or \[100 (one hundred) percent\] or \[at least \[●\] percent\] of the electricity supplied to the \[Supplier\] or \[Contractor\] and its subcontractors and suppliers relating to performance of its obligations under this Agreement is Wholly Renewable Energy\].\]\*

\*\[*Drafting note: Delete if this would be too difficult to comply with in practice.*\]

**Use clause 3 only with Drafting Options B or C (where there is an energy procurement)**\[Compliance with the Renewable Energy Obligation\] or \[Energy Contract\]\*

\*\[*Drafting note: The contracting parties may wish to consider whether the failure to comply with the Renewable Energy Obligation gives rise to a termination event. If so, this should be addressed in the termination clause.*\]

2.3 The \[Supplier\] or \[Contractor\] shall ensure that the Energy Contract:

(a) requires the Energy Supplier to comply with \[the Renewable Energy Obligation\] or \[clause \[1\]\];

(b) enables the \[Supplier\] or \[Contractor\] to monitor and verify compliance by the Energy Supplier with the Renewable Energy Obligation \[in a material way\];

(c) allows the \[Supplier\] or \[Contractor\] to audit the Energy Supplier’s compliance with the Renewable Energy Obligation \[and disclose the results of that audit to the \[Company\] or \[Principal\] under this Contract\]; and

(d) contains a right of termination for the \[Supplier\] or \[Contractor\] for repeated failures to comply with the Renewable Energy Obligation.\]

**3 Equivalent provisions for \[Supplier’s\] or \[Contractor’s\] Subcontractors and Suppliers**

The \[Supplier\] or \[Contractor\] shall use its reasonable efforts to ensure that its contracts with subcontractors and suppliers that relate to performance of its obligations under this Agreement contain provisions equivalent to clauses \[1-3\].
