World’s Largest Office Furniture Manufacturer Steelcase Signs Deal for 25 MW of Wind Energy
The world’s largest manufacturer of office furniture will soon offset 70 percent of its total U.S. electricity usage with wind power from a long-term virtual power purchase agreement (PPA). Steelcase, based in Grand Rapids, Michigan, just announced an agreement with Apex Clean Energy for 25 MW of wind power. Under the 12-year PPA, Steelcase will support the production of power from Apex’s Grant Plains Wind Project, a 150-MW facility in Grant County, Oklahoma, scheduled to come online at the end of this year.
Apex Clean Energy was the market leader for new U.S. wind capacity additions in 2015, with 1,042 MW completed. Steelcase and Apex are member and sponsor, respectively, of RMI’s Business Renewables Center (BRC). With its members, BRC is streamlining and accelerating large-scale corporate renewable energy purchasing
Strengthening Its Investment in Clean Energy
Steelcase has a goal to reduce its energy consumption and greenhouse gas emissions by 25 percent from 2010 levels by 2020. The company has long been a proponent of sustainability. The company actually began purchasing renewable energy credits (RECs) in 2001, and by 2014 had enough RECs to offset 100 percent of its global electricity consumption. Steelcase’s deal is a strong testament to how the market is shifting from RECs to additionality with PPAs. “This PPA is the next step in that portfolio, to have an even greater impact in the renewable energy landscape,” says John DeAngelis, energy program manager for Steelcase. “And it makes business sense, mitigating the risk on energy price volatility.”
Price Hedge on Electricity Costs
The long-term PPA means that Steelcase agrees to pay Apex a fixed price for each unit of electricity produced by the wind farm. This provides a hedge against any future increases in the wholesale forward market prices in the local market where the project delivers its electricity. Meanwhile, Steelcase still pays its utility for retail electric service. But if prices go up, the fixed price PPA gets more and more “in the money” helping offset the rising grid prices. “We have talked to a lot of corporations that want to approach a virtual PPA to save money right away. In some cases that’s possible,” says Steve Vavrik, chief commercial officer for Apex. “But that misses the main point of risk mitigation. The main advantage is we’re hedging a risk that folks might not understand they have.” Fortunately, that wasn’t the case with Steelcase. The company understood how a virtual PPA worked and that it was a hedge for the energy budget. “From our standpoint it was a win-win situation,” says DeAngelis. “A way to mitigate risk and a benefit to the environment and local communities.”
“We applaud John DeAngelis for taking the leadership role in assessing energy risk mitigation at Steelcase,” says Hervé Touati, a managing director at RMI and head of the BRC. “His determination in moving the PPA forward so effectively sets a great example for other companies to follow.”
An Educated Buyer
Most corporations don’t specialize in energy deals. Case in point: Steelcase makes office furniture. But the company leveraged BRC’s resources and network to up-speed quickly and come to the table with Apex as a more-educated-than-usual buyer. “BRC has been a huge help. Everything from the primers it produces to the connections it gave us to other leading companies like Kaiser Permanente and GM,” DeAngelis told RMI. “BRC gave us the access to talk to those leaders, and also helped connect us with our external legal counsel K&L Gates, another BRC member.”
According to Vavrik, “Steelcase came in to the deal very knowledgeable and had a good sense of what they wanted, which helped make the sale process go a lot faster. BRC has certainly fulfilled one of its goals as being a trusted resource for corporate buyers,” adds Erik Haug, business development senior associate at Apex. “Steelcase was very well informed of the different aspects of a virtual PPA. Having a champion within the corporate organization is key.”
First-Time Buyers Entering the Market
While a lot of big corporate players have been signing PPAs recently, including Google, Apple, Amazon, Facebook, Walmart, and Ikea, Steelcase is hoping to facilitate a new generation of renewable energy agreements, for smaller corporations and first-time buyers. “It’s going to be important to get smaller companies on board in order to facilitate and meet some of the aggressive goals of the BRC and the environmental goals that companies have,” says DeAngelis. “We are probably one of the smallest companies to execute this type of agreement. We hope it helps bring the next tier of companies, beyond the Apples and Googles, to the table, and allows them to sign similar PPAs.” Lily Donge, a principal at RMI and leader of BRC, agrees: “John [DeAngelis] learned very quickly and really drove the deal home. The Steelcase deal shows that any size company can do this.”
BRC’s goal is to have 60 GW of new installed renewable energy capacity in the U.S. by 2035. In the past two years, corporations signed 4.6 GW of PPAs, so the market is well on its way. According to DeAngelis, “This PPA helped to start off this year with a bang for the renewable energy landscape, and we’re hoping to see many other companies join as well.”