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Corporate Renewable Energy Deals Smash Records in 2018


Corporate renewable energy procurement in the United States has reached a new level.

As of August, non-utility buyers had announced contracts for more than 3.5 gigawatts of renewable energy projects in 2018 to date, setting a new single-year record in the U.S. That’s well above the previous 3.12-gigawatt record set in 2015, and the 2.89 gigawatts contracted for in 2017.

Since then, procurement numbers have continued to grow, as the corporate renewables market has matured and expanded to include new geographies and new buyers. 

According to the latest figures from Business Renewables Center, a membership program at Rocky Mountain Institute (RMI), corporate buyers in the U.S. have now purchased a total of 4.81 gigawatts of renewable energy so far this year — and are expected to top 5 gigawatts by December.

The total number of commercial and industrial renewable energy deals will be even higher, as RMI’s numbers refer only to contracts for large, off-site renewable energy projects. That means rooftop solar projects deployed by the likes of Ikea and Target are not included in the RMI deal tracker, which was updated this week at the Renewable Energy Buyers Alliance conference in Oakland, California.

There are two main reasons for this, according to Kevin Haley, BRC program manager. First, there’s been strong continued support from major tech companies with large electricity loads. Facebook and AT&T, for instance, have procured the most new renewable energy capacity in 2018, with other large deals from Microsoft, Apple and Walmart. The second reason is that the pool of corporate customers is starting to expand.

“A strong number of new first-time buyers are continuing to enter into the market,” said Haley. “A lot of this growth is being driven by companies that may not have done a deal yet.”

In fact, 2018 has also set a record for the most first-time buyers in a single year. Nearly 20 new corporate buyers entered the renewable energy market this year, while the cumulative number of unique buyers this year is just shy of 70.

Companies are facing some pressure to procure renewables this year with the Investment Tax Credit for solar and the Production Tax Credit for wind set to step down over the next few years. But according to Haley, that’s not the main driver of growth at this point.

“It’s still very much market interest, and new buyers, and that sort of thing,” he said. “But we do anticipate companies will want to lock in lower prices as the expiration of the PTC [and ITC] comes up.”

Many companies are taking the push for 100 percent renewables seriously because they see it as good business — not just today, but for the long-term. At the time of publication, 152 companies of various sizes have made a commitment to go 100 percent renewable through RE100. Big names like Apple and Google have already met their targets, while other companies are looking out further into the future, some as far as 2040. That timeline indicates companies are looking beyond today’s prices and present-day marketing benefits.

“I think it’s something they’re seeing as achievable, as power purchase agreements and other transactions become more streamlined and easier to use and de-risked,” Haley said.

Also, “as they look at the future of the grid and the future of policy and consider what a potential carbon tax impact may have on their business,” he added. “This is something where companies are looking further down the road and saying, ‘This makes good business sense.’”

Derisking corporate renewable energy deals

In the interest of re-risking renewable energy deals, Microsoft this week announced a new way to make corporate power-purchase agreements (PPAs) less complex. Microsoft and co-developer REsurety, along with partners at Nephila Climate and Allianz Global Corporate & Specialty, are calling it a volume firming agreement (VFA).

“VFAs are intended to be a simple fix to a big challenge with renewable energy PPAs, namely that these deals expose the buyer to all the weather-related risks of power production, and the inherent intermittent nature of wind and solar means there are hourly issues to be addressed,” according to a Microsoft blog post.

Renewable energy variability is a problem for corporate buyers. But what is undesirable to buyers is attractive for insurance companies, whose core business revolves around managing weather-related risks. VFAs sit on top of a new or existing PPA and are effectively designed to pay the corporate buyer when they’re getting less renewable power than they contracted for, and give money to the insurer when there’s more.

In addition to co-developing this solution, Microsoft is the first VFA adopter, and anticipates using VFAs to firm its renewable energy generation and match consumption on an hourly basis.

“We all know renewable energy without storage is a variable product and that can have impacts on how the PPA Microsoft enters into performs over the long run,” said Haley. “What they’ve done is de-risk the performance of these PPAs with essentially an insurance product against core performance.”

Signs of a maturing market

This launch of VFAs is a testament to the maturation of the corporate renewables market. Another sign of this is Google’s recent announcement that it’s looking for a way to use zero emissions energy all of the time.

Last year, the tech giant matched 100 percent of its annual electricity consumption with renewable energy purchases, and has committed to continue doing so as the company grows. Last week, Google built on the 100 percent concept with the release of Carbon Heat Maps, which show that there are times and places where Google’s electricity profile is not yet fully carbon-free — which is what Google wants to be. 

“[The maps] suggest that our 100 percent renewable energy purchasing goal — which relies on buying surplus renewable energy when it’s sunny and windy, to offset the lack of renewable energy supply in other situations — is an important first step toward achieving a fully carbon-free future,” Michael Terrell, Google’s head of energy markets, wrote in a blog post. “Ultimately, we aspire to source carbon-free energy for our operations in all places, at all times.”

Going carbon-free “will be no easy feat,” Terrell added, “but the urgency of climate change demands bold solutions.” Google published a discussion paper identifies several key actions that it and other actors can take to achieve 24×7 carbon-free energy.

Not all companies are ready to think about using renewables around the clock, Haley noted. Especially since there’s still more work to be done in opening up the corporate market, both to new buyers and in new locations.

U.S. corporate deals are starting to crop up in more states. Over the past decade, 26 states have done corporate renewable deals. In 2018, Utah became the latest new state to see its first corporate renewable energy procurement.

The expansion is thanks largely to innovation on the policy front, which has opened up opportunities in regulated electricity markets. The number of corporate renewable energy deals signed under utility green tariff programs continues to grow, representing around 25 percent of corporate renewables procurement so far this year. At the same time, utilities are incorporating corporate renewables into their long term planning — and thinking about solutions beyond green tariffs to better meet the needs of existing corporate customers and smaller loads.

As 2018 has shown that serving smaller corporate customers is key to seeing continued corporate renewable energy growth overall. On that front, aggregation has emerged as a promising deal structure, said Haley.

Simply put, this model allows companies of all sizes to partner up on a renewable energy agreement. In August, Apple, Akamai, Etsy and Swiss Re announced an agreement to develop two new wind and solar energy farms in Illinois and Virginia through this method.

Through collaboration, smaller buyers can benefit from economies of scale, while larger buyers can continue to see cost benefits while achieving their renewable energy goals. Aggregation allows companies to procure in a mutually beneficial way with relatively little give and take. For that reason, RMI believes this marks “the beginning of a trend,” Haley said.  

He added that RMI is spending a lot of time with smaller corporate buyers in order to help them enter the market. As large, leading companies move closer to 100 percent renewables, “we want to ensure that’s not the end of the story,” Haley said.

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