State of Green Business
Apple, Akamai, Etsy and Swiss Re get together to buy clean power
If you study lists enumerating corporate contracts to buy renewable energy, one thing becomes clear very quickly — it’s tough to find a deal for less than 20 megawatts of capacity, a factor that has discouraged many would-be buyers with loads far less than that amount.
The smallest power purchase agreement listed on the GreenBiz quarterly tracker for Q2, for example, was a 17 MW transaction by media organization Bloomberg. Indeed, it’s tough to find an arrangement smaller than the 5-MW contract announced in January between data center company Iron Mountain and Renewable Power Direct.
But a groundbreaking deal disclosed this week by tech giant Apple, software concern Akamai, e-commerce pioneer Etsy and re-insurance pioneer Swiss Re promises to become an inspirational model for how like-minded businesses collaborate to add more clean power to the electric grid.
Collectively, the companies have committed to buy a whopping 290 MWs of electricity capacity — enough power to serve 74,000 homes for a year — from two projects. To be specific, the various power purchase agreements they have signed cover 125 MWs from a wind farm near Chicago being Geronimo Energy and 165 MWs from a solar plant in Virginia being brought to life by sPower (an AES and AIMCo company). Both installations are slated to come online within the next two years.
Considered in aggregate, this transaction will bring an enormous amount of solar and wind electricity to the PJM electric grid that serves 13 states in the eastern United States, which is not a place where you typically see many corporate PPAs emerge. And without Apple’s willingness to step forward as a lead buyer, its three corporate partners wouldn’t typically have been able to participate in the two projects on terms they were willing to accept from a financial or risk standpoint.
"They provided, for us, a safety net," said Lasse Wallquist, senior sustainability risk manager for Swiss Re.
"The terms were aligned with our needs entirely," said Chelsea Mozen, sustainability lead with Etsy, who has been searching for a deal sized at under 10 MWs for some time. The deal will enable the company to meet its declared goal of being 100 percent renewably powered by 2020, she said. "We had been looking for quite some time."
The size of the individual virtual PPAs used to cover this capacity was not disclosed, and Apple declined to comment on those details on the record.
A convergence of values
The backstory of how these four companies came together features many plot twists. But the idea was born out of side conversations — you could call them therapy sessions — during industry gatherings, including summit meetings orchestrated by the Rocky Mountain Institute Business Renewables Center.
The collaboration originally involved Apple, Akamai and Etsy. Swiss Re became involved at a later date when it became clear that its team shared the same renewable energy buying philosophy as the others.
Swiss Re — a founding member of the RE 100 pledge — originally was looking at deal opportunities in Europe, Wallquist said. But as a large portion of the reinsurance company’s business is generated in the United States, 3Degrees (which it was using as an adviser) suggested that it consider aligning with the other three companies. The deal announced this week will help the company reach the 100 percent renewable electricity goal for its U.S. operations.
While the process was far from simple, three unifying factors helped make the decision-making priorities clearer, according to Etsy and Swiss Re.
All of the companies believed strongly that the installations be located in regions close to their actual operations, which was a big factor in the decision to opt for projects in the PJM region. Akamai is based in Cambridge, Massachusetts, and Etsy hails from Brooklyn, New York. While Swiss Re supports many small offices across the United States, it has a big presence in Armonk, New York, where a solar plant covers 60 percent of its power consumption.
None of the companies was willing to purchase unbundled renewable energy certificates (RECs) as part of the transaction. "It was critical for us, at least, to maximize our impact from an ecological perspective," Mozen said.
They hired an intermediary, 3Degrees, to help orchestrate the process. While Apple was clearly the lead decisionmaker, this move was instrumental for ensuring consensus and keeping the discussions on track, according to Etsy and Swiss Re. For this role, 3Degrees received a consulting fee that was handled and billed separately from the PPAs themselves.
[Learn more about how renewable energy buyers are experimenting with collaboration at VERGE 18 in October in Oakland, California.]
Will there be more deals like this in the future, where corporate buyers essentially "aggregate" their demand to negotiate with project developers? Wallquist said his team will call upon its experience with this deal to evaluate future opportunities in places in Europe and India, where it currently must purchase RECs to offset its renewable energy commitment.
Erin Craig, vice president of the energy and climate practice at 3Degrees, described the deal announced this week as a proof-of-concept. "We definitely find it's valuable from this standpoint," she said. "It certainly shows that companies can collaborate this way, and that they all feel they got something good out of it."
But collaborations of this nature are still relatively rare. Another example that organizations should study closely comes from Europe, where chemical company AkzoNobel, tech firm Google, biotech and health sciences organization DSM and health tech multinational Philips have joined forces to negotiate at least two PPAs for wind farms in the Netherlands. As of December, they had disclosed two contracts: one for the 102-MW Krammer Wind Park, the other for the 340-MW Bouwdokken Wind Project.
"Shared leadership turned out to be a key part of the consortium’s ability to reach a mutually beneficial deal," said Sim van der Linde, project director of renewable energy at DSM, in a statement about the deals. "It was important to us to be able to advance toward our goal of 50 percent purchase renewable electricity by 2025."
Unlike the Apple deal, which involved separate PPAs for each participant, the European consortium approaches projects as equals when it comes to the purchase process, according to both a case study about the model (PDF) prepared by the Rocky Mountain Institute and a presentation at a recent BRC gathering in New Jersey. In other words, each company buys 25 percent of the capacity under the same financial terms. They share risks in the same way. Their first contract took 36 months to negotiate; the second took half that time.
That said, the participants also have divvied up certain responsibilities, based on expertise. AkzoNobel managed communications, DSM and Google contributed their legal knowledge and Philips drove the accounting processes.
This year already has been a record-breaker when it comes to corporate renewable energy procurement, according to data released in early August by Bloomberg NEF. So far, companies have contracted for 7.2 gigawatts of clean power in 2018, more than the 5.4-GW record set in 2017.
On paper, Facebook has been the more aggressive buyer in 2018, with 1.1 GWs in purchases; AT&T is No. 2, with 820 MW, followed by aluminum company Norsk Hydro.
About 60 percent of the renewable electricity covered under these corporate purchases will come from projects in the United States. But Europe has also had a record year for renewables procurement, according to the data, with 1.6 GW in clean power transactions disclosed so far this year.