This article is sponsored by LevelTen Energy.
If you want to predict where the renewable energy industry is headed, simply look toward the world’s largest technology companies.
The tech titans — Amazon, Apple, Facebook, Google and Microsoft — have long been at the forefront of corporate renewable energy procurement, and more recently midsize companies such as Salesforce also have pushed the industry forward. Over the past five years they’ve been the largest purchasers of renewable electricity in the U.S., and they’ve wielded their immense buying power to transform the landscape. They set the bar when it comes to corporate sustainability goals, and every year they move that bar higher.
As we head into 2021, these are the new goalposts that LevelTen predicts corporate renewable energy buyers will strive toward as a result of the tech titans’ leadership.
1. Social justice will be a key consideration
As part of the renewable energy procurement process, more corporations are taking into account the diversity of employees and fair pay practices of renewable energy project developers. Source: iStock.
The Black Lives Matter movement and George Floyd protests have sent ripples through every industry and every boardroom, affecting issues far beyond police brutality. Companies are not only taking a deeper look at the diversity of their own employees, they’re also reevaluating how they advocate for social justice through their business practices and procurement.
When it comes to renewable energy, Microsoft has established an innovative model that LevelTen anticipates others will follow. In July, Microsoft committed to develop a portfolio of 500 megawatts of solar energy projects in under-resourced communities in the U.S., working with local leaders and prioritizing minority and women-owned businesses. The company also will aim to procure in "communities that are economically under-resourced, disproportionately impacted by pollution and/or lack access to the benefits of the clean energy transition."
Another leader in this space is Salesforce, which recently published its "More than a Megawatt" paper. It provides a starting framework and expert third-party guidance on how to maximize the positive impacts of corporate renewable energy purchases and minimize the negative impacts.
They’re not the only ones. This year, multiple corporate buyers have asked LevelTen to evaluate social justice criteria when selecting a renewable energy project for a power purchase agreement. These buyers not only want to know how the project will positively affect the community — such as reducing pollution, generating tax revenue and creating jobs — they also want to know how the developer of the project treats its employees, including diversity and fair pay. They also want to ensure the developer creates supply chain accountability and adheres to responsible business practices.
To be more competitive, developers must reevaluate their own businesses, and many are already starting to do so. Just a few weeks ago, a group of leading solar and renewable energy companies and trade organizations launched an initiative called Renewables Forward, which will develop concrete steps to increase workforce diversity and inclusion throughout the industry.
2. More companies will aim to be 100% renewable at all times
Google’s new goal is to achieve 100% renewable energy 24/7. Source: Google’s white paper, “24/7 by 2030: Realizing a Carbon-free Future.”
First the goal was to be "carbon-neutral." Then "100 percent renewable." Then "carbon negative." Now, thanks to Google, the new goal is to become "100 percent renewable every hour of every day."
Companies can claim they’re 100 percent renewable by purchasing enough clean energy to cover the amount of energy they use on an annual basis — not an hourly basis. In other words, 100 percent renewable means that in many hours of the day companies are consuming more than the renewable energy they’re buying.
So, even though these companies may have achieved a 100 percent renewable goal, fossil fuels are required to support their energy demand so that you can watch a cat video on YouTube, do some online shopping on Amazon, email your coworker on Outlook or surf Facebook on your iPhone at night. Every technology company contributes to this.
Google wants to eliminate the need for fossil fuels altogether by matching the time of renewable energy generation to the time the energy is consumed. To get there, the company has developed new technology that shifts the electricity demands of its largest data centers to match clean energy supply. The company is also looking for ways to improve its renewable energy procurement through power purchase agreements (PPAs). In Google’s white paper outlining its strategy for 24/7 clean energy, the company stated:
In 2010, Google signed its first Power Purchase Agreement (PPA) for electricity from an Iowa wind farm, helping to popularize a tool that has since become a mainstay for companies that purchase renewable energy. Yet as important as traditional PPAs have been and will continue to be, they also have limitations. We can break down barriers that prevent Google and others from buying clean energy by developing new transactional approaches, such as: 1) moving from single-source PPAs to multi-source and multi-technology-blended PPAs, 2) creating utility programs to enable broader access to affordable clean energy, and 3) developing new models where multiple users can share clean energy assets.
Fortunately, new technology doesn’t need to be invented to achieve this. Examples of such transactional approaches that exist today include the portfolio of wind and solar PPAs that LevelTen helped Starbucks enter into last year; Constellation’s CORE+ program, which enables its business customers to support new build projects; and the collaboration between Bloomberg, Cox Enterprises, Gap Inc., Salesforce and Workday to jointly purchase 42.5 MW of solar power last year.
3. More companies will commit to reduce Scope 3 emissions
Apple’s goal is to get to 100 percent renewable energy in its supply chain by 2030. Source: Apple’s “Supplier Clean Energy 2020 Program Update.”
Scope 3 emissions are those caused by the production and use of a company’s products and often are the largest source of emissions for a company. For example, Scope 3 emissions from manufacturing make up about 75 percent of Apple’s overall carbon footprint. Unlike Scope 1 and 2 emissions, which a corporation can reduce through energy-efficiency measures and renewable energy procurement, Scope 3 emissions are out of the company’s direct control, so they are the most difficult to reduce. That’s not stopping them from trying.
Apple, for example, has a goal to transition the electricity used across its entire manufacturing supply chain to 100 percent renewable sources by 2030. Through Apple’s Supplier Clean Energy Program, 71 manufacturing partners in 17 countries have committed to 100 percent renewable energy for Apple production. As a result of the program, in August, Taiwan Semiconductor Manufacturing Company, an Apple supplier, signed the largest corporate PPA to date, a 20-year contract for the entire output of a 920 MW offshore wind farm owned by Ørsted in Taiwan.
Amazon, Facebook, Google and Microsoft also have committed to reducing emissions in their supply chains. Given the size of those networks, this will have massive repercussions around the world. Their suppliers in Europe and Asia are turning to renewable energy procurement for the first time, transforming global energy markets. According to BloombergNEF, the first half of 2020 saw significantly higher volumes of procurement in Europe, Australia and Taiwan than last year.
One way that corporations can assist their suppliers in purchasing clean energy is through buyer aggregation; the corporation can team up with multiple suppliers to purchase the entire output of a project. LevelTen has facilitated aggregated deals and is receiving growing interest from corporations looking for supply chain solutions.
4. Storage will be added to PPA portfolios
Corporations are entering into power purchase agreement contracts with energy storage projects. Source: iStock.
In 2021, corporations won’t just be signing PPAs for wind and solar projects, they’ll also be doing deals connected with utility-scale storage projects. LevelTen has helped clients enter into storage agreements this year, and we expect more to come in 2021.
There are a few reasons for this:
- They’re economically attractive. The industry has scaled to the point where costs to develop projects have declined and more storage projects are becoming available to enter into contracts with — as we’ve seen on the LevelTen Marketplace. In addition, storage projects have the unique ability to charge when electricity prices are low and sell when electricity prices are high, enabling offtakers to capture the difference and balance wholesale market exposure in their renewable energy portfolio.
- They extend the availability of clean energy. Corporations (such as Google) that want to match the time of energy usage to the time of energy generation (see No. 2 above) often invest in a portfolio of wind and solar projects to maximize the number of hours that clean energy is being generated in a day. With storage, those hours can be extended further, ensuring clean energy is being made available when the wind isn’t blowing and the sun isn’t shining. This is also when fossil fuels are used the most, which means storage greatly reduces emissions.
Although Facebook hasn’t publicly announced any storage contracts, it is investing in the technology. Facebook and Carnegie Mellon University recently announced they are trying to use artificial intelligence to find new "electrocatalysts" that can help to store electricity generated by renewable energy sources.
In addition to the technical challenges of storing energy, grid infrastructure and utilities will need to adapt to the new capabilities. But with the right policies and regulatory frameworks in place, the energy storage industry is expected to boom, and corporations will help fuel that growth.
5. The need for speed will drive innovation
The process of entering into power purchase agreements with wind and solar projects takes too long to meet the needs of large corporate renewable energy buyers. Source: iStock.
Many of the tech companies’ most ambitious sustainability targets are set for 2030. While a decade may feel like a long time, it can take years to develop, finance and build a new renewable energy project.
At the same time, these companies have to keep up with a constantly growing demand for energy. It’s not enough to cover their current energy usage; they also need to be prepared to cover what they’ll be using years from now.
Corporations are up against the clock and can’t sign deals fast enough. The current PPA process is too manual and time-consuming to meet their needs. We predict new solutions will arise in 2021, either from the tech titans themselves or from other market participants, to speed the process.