The 5 emerging themes of renewable energy buying
A macro look at the shifting landscape of corporate green power purchasing.
More than 160 executives — many from the Fortune 500 — came together in Novemeber at Bloomberg's New York City office for the Business Renewables Center's latest semiannual meeting. Compared to the BRC's previous meeting in San Francisco in May, it was hard not to notice at least two things: A significant growth in demand for the event and size of the attendee list (more than doubling from 75 to 160-plus), and a palpable pivot in the general attitude of attendees when it comes to corporate renewable energy purchasing of renewables.
The overall mood of market participants has shifted from "can we do this" to "we will do this." The biggest question remains how do it — the easier and faster and smoother, the better. Over the course of the day-long event, several major themes came to the forefront.
1. The customer is driving the market
From the keynote address of Jigar Shah, founder and former CEO of SunEdison and cohost of Greentech Media's popular The Energy Gang podcast, to roundtable discussions on various topics, it's clear that corporate buyers are driving the market. Corporations continue to account for a growing percentage of major renewable energy power purchase agreements (PPAs). Some argue that's because many utilities either have not offered, been too slow to offer and/or offer at a premium the clean energy major corporate customers have been asking for. Regardless, corporations want — and are going after — clean energy.
2. Increasing market transparency is crucial
General attitudes are shifting regarding renewable energy certificates (RECs), PPAs, and how they respectively contribute to additionality (such as getting new renewable energy capacity built versus taking credit for renewables already on the grid). PPAs are undoubtedly the driving force of additionality of late. And although there is far from universal agreement about the role of RECs bundled with and unbundled from PPAs, consensus is widespread that improving market transparency is crucial to accelerating corporate renewable energy purchasing. That transparency can take many forms, from clarity on the impact of the Clean Power Plan, to better certainty on possible extensions to the production tax credit (PTC) and investment tax credit (ITC) and a possible post-PTC/ITC world, to simply enabling renewable energy developers with a project pipeline and prospective corporate buyers to find one another through a marketplace that brings them together.
3. The market is expanding, and likely will expand even more
For logical reasons, the corporate renewable energy PPA market is intensely focused on states with deregulated electricity markets and ISOs/RTOs with robust wholesale markets and strong renewable energy potential. To date, that has meant lots of wind deals in ERCOT, for example, such as BRC member Hewlett Packard's deal for 112 MW of Texas wind to power its data centers in that state with 100 percent clean energy. But recent developments — including the Southwest Power Pool's major redistricting to grow from eight to 14 states — are greatly expanding the potential market. With many global/multinational companies in the mix, there's also intense interest in going beyond U.S. borders to places such as China, India, and the EU for additional renewable energy deals, as BRC member GM did with Mexican wind.
4. Sizing and allocating risk and securing financing and approval are the keystone
Risk is the four-letter word that everyone talks about and no one wants. Developers need big corporate offtakers to assume more of it so that projects get financed, while those corporate buyers would prefer to shoulder none of it and keep their CFOs and accounting departments happier. But most important, accurately assessing project risk — including that associated with locking in long-term fixed-price PPAs and their potential hedge value against wholesale forward market prices and volatile fossil-fuel prices — and then conveying that risk and other financing variables in language and terms accounting departments and financiers understand will be the keystone to having more corporate buyers successfully participate in the market.
5. A portfolio of on- and off-site solutions is of great interest
For companies with major clean-energy, carbon-reduction and/or climate-neutrality targets, large-scale off-site renewable energy PPAs for utility-scale wind and solar are more or less a necessary step. They can't get to significant percentages (say 30-plus percent) via other means. But on-site energy efficiency and distributed generation such as rooftop and ground-mount solar PV remains of great interest, in part because of the public visibility and thus brand reputational benefits it offers. There's also much interest in energy storage, which can offer myriad benefits that aid both renewable integration into a company's energy portfolio plus other revenue streams that could strengthen renewables' value proposition.
The BRC advancing the market
In cooperation with its members, sponsors and advisors, the BRC is working intensely toward advancing these and other issues central to the corporate renewable energy market. As a record-setting 2015 draws to a close in just over one month, the BRC's work continues stronger than ever — guided by the 160-plus voices that assembled in New York City last week. Even as we watch the market for additional end-of-year deal announcements that will push 2015 even higher for corporate renewable energy PPAs, the BRC now looks at the months ahead with a new and refined work plan designed to continue accelerating the market toward 60 GW of new renewable energy capacity in the U.S.
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