It took two years of education and negotiation, but the ink is drying on the first aggregated power purchase agreement orchestrated under Walmart’s renewable energy acceleration for suppliers, officially known as Gigaton PPA.
The transaction covers an annual purchase of about 250,000 megawatt-hours of power from the Ørsted Sunflower Wind Farm in Marion County, Kansas, slated to come online this year. The buyers include Amy’s Kitchen, Great Lakes Cheese, Levi Strauss & Co., The J.M. Smucker Co. and Valvoline. Other terms of the deal weren’t disclosed.
The Gigaton PPA initiative, announced in early 2020 when the market for corporate PPAs was quite different, is part of the global retailer’s five-year-old Project Gigaton, which aims to help reduce or avoid 1 billion metric tons within Walmart’s value chain by 2030. Last month, Walmart announced that the roughly 4,500 suppliers who joined the program are more than halfway toward that goal.
The renewable power resource is a newer part of the effort, one that attracted more than 450 companies when it was first announced in 2020, according to officials responsible for managing the effort. The initiative centers on providing training and resources to help suppliers invest in renewable energy. "It was very timely for a lot of suppliers," said Zach Freeze, senior director of strategic initiatives, sustainability, at Walmart. "They were interested in getting into this world, and they didn’t know how."
The first few months of the program — managed by Schneider Electric, which also runs similar programs for PepsiCo and a collective of pharmaceutical companies including GSK — centered on helping educating suppliers interested in procuring electricity generated by solar farms, wind turbines and other renewable options as part of their strategy for reducing greenhouse gas emissions.
It was very timely for a lot of suppliers.
That training also aims to uncover interest in exploring a joint PPA, in which several companies combine forces to negotiate a contract. Examples of this sort of deal include one organized by Apple, which used its buying clout to help negotiate the transaction on behalf of the other participants, including Akamai, Etsy and Swiss Re.
So far, aggregated PPA deals have been few and far between, but Freeze said there was an enormous amount of interest from Walmart suppliers in participating — even amid the market uncertainty and "unstable" environment caused by the COVID-19 pandemic, inflation, supply chain disruptions, grid interconnection delays and shifting tariffs on equipment. Together, the companies in the first cohort of Gigaton PPA will account for approximately 62 megawatts of generation capacity of the 200 MW wind farm, according to a representative from Schneider Electric.
John Powers, vice president of global cleantech and renewables at Schneider Electric, said interest in the first collective PPA outstripped the number of companies Walmart wanted to include in the first cohort. The companies chosen to participate met certain criteria in terms of the renewable power load they wanted to procure, their credit profiles, their willingness to sign a long-term procurement contract and the industries they represent (Walmart sought a diversity of representation).
It was also important that the companies be flexible: The group was presented with several projects before it ultimately decided on the Sunflower Wind Farm opportunity, Powers said. It took about one year to bring the deal to completion, a relatively typical amount of time when you consider the time it usually takes to negotiate a PPA with a single company.
Walmart didn’t play a role in the contract nor is it offering any special incentives to the companies that ultimately signed on, according to Freeze. However, that doesn’t preclude the retailer from being involved in future deals, he said. As part of this deal, Schneider Electric was the entity that organized the negotiations.
A second cohort of companies is already standing by to work on the next Gigaton PPA transaction, according to Freeze and Powers. "We are in the phase of aligning objectives and incentives," Powers said. While the deal is under way, no timeline has been disclosed.
In addition, Walmart and Schneider Electric are exploring other renewable electricity procurement options that might appeal to Walmart suppliers, particularly those that support companies that need to make shorter-term purchases as well as potential on-site solar installation opportunities. "We wanted to start with PPA aggregation because of the impact of these deals," Powers said. "It doesn’t mean it’s the only solution … It’s not going to be the right solution for every supplier."