Why Sysco chose a new recipe for its first off-site clean energy deal
In the scheme of things, foodservice company Sysco’s new clean power arrangement with NRG Energy isn’t particularly large (just 25 megawatts), lengthy (10 years) or wordy (less than 10 contract pages).
The simplicity and relatively modest size are precisely what makes the deal announced in early June — which covers three solar "gardens" in the Houston and Dallas area and came together in only six weeks — so notable. Solar gardens generally provide community resources; usually to multiple subscribers that may not be able to host solar installations because of space or shading constraints.
"This project is a great fit for Sysco," wrote Neil Russell, vice president of investor relations, communications, T&E and treasurer, in response to a question by GreenBiz. "It offered us an opportunity to add additional solar energy to the grid in our Texas communities and will support the majority of our electricity load in the state. In addition, we like that we can combine the benefits of a simple, traditional price structure with the environmental benefits of the solar garden."
The project, slated to come online in the first quarter of 2019, will cover about 10 percent of Sysco’s U.S. electricity usage and offset 37,000 tons of carbon dioxide emissions annually, according to a press release that the $55 billion company issued with deal partner NRG. The arrangement includes "naming rights" for the solar gardens, which will help bring attention to Sysco’s investment within the community. Sysco is holding a contest among its 65,000 employees.
"We felt this would be a great opportunity to create awareness of our renewable energy commitment within our organization, as well as generate both creative names and excitement for this new project," Russell wrote.
The deal is the first under a new "fixed price" program that NRG developed for commercial and industrial accounts to address three common concerns of corporate renewable energy buyers:
- The lengthy tenure of many traditional PPAs.
- A reluctance to take on unfamiliar operational risks and processes that aren’t core to the business.
- How to participate without representing hundreds of megawatts of procurement demand.
The contracts that NRG offers under the new program are from between seven and 10 years in length, and are based on principles of traditional PPAs. They're customized to the buyer's needs, but NRG has streamlined many terms and conditions. It also assumes many of the risks, such as having to manage wholesale pricing fluctuations.
Lynda Clemmons, vice president of sustainable solutions for NRG, described the terms as "simple" and "straightforward." NRG takes on the risk of managing when power is produced and where it is directed under a power purchase agreement. It then sells the "environmental value" to large businesses. The contract is settled as part of the company's monthly retail electricity bill.
"It’s an arrangement very much like the one they would sign through a regular electricity procurement process," Clemmons said.
NRG is teaming with solar developer Cypress Creek Renewables to make the Sysco project possible. Right now, the broader plan is available only in the Electric Reliability Council of Texas (ERCOT) market, which manages a deregulated system serving about 75 percent of the state. "Solar makes sense because it is more easily sized and located. You can put most projects where the resources need to be," she said.
Will this offering be expanded to other deregulated grid regions? That will be dictated, in part, by demand. When I interviewed Clemmons about the Sysco deal, NRG was working toward another contract, but that customer has not yet been disclosed.