A New Chapter for Renewable Energy Buyers

More than 250 executives attended the 2016 Renewable Energy Buyers Alliance (REBA) Summit at Microsoft’s headquarters in Redmond, Washington, last week, with the objective of accelerating corporate procurement of renewable energy. REBA is a fast-moving partnership of four NGOs with strong ties to multinational companies: BSR’s Future of Internet Power, RMI’s Business Renewables Center (BRC), and the Corporate Renewable Energy Buyers’ Principles, a project of World Wildlife Fund (WWF) and World Resources Institute (WRI). Over two days, the executives collectively identified the most important challenges and proposed collaborative solutions for the renewable energy community to address in order to achieve the BRC’s ambitious goal of 60 GW of additional renewable energy capacity by 2025.

The summit was joined by leaders of the heavy hitters of corporate renewables, including market leaders Google, Amazon, Walmart, Equinix, and Microsoft, which have signed contracts to purchase over 3.3 GW of renewables between them. First movers are important, paving the way and sharing their learnings with others. And the majority of the industry’s first movers were in the room, with attendees from 17 of the 28 corporations that have signed deals for over 5.5 GW of renewables. Importantly, they were joined by executives from more than 30 corporate buyers that have yet to ink a renewable energy deal. Corporate renewable energy purchasing has moved beyond just IT companies and data centers; now companies making diapers, beer, theme parks, and candy are starting to find out that they, too can join in and take advantage of renewable energy options.

Three key themes emerged over the two days, all of which will be critical to scaling this market:

1) New stakeholders are expanding the market

2) New deal structures and solutions are poised to transform the market, including:

• Risk allocation
• The BRC’s Online Marketplace
• Solutions for small buyers

3) Companies are starting to look beyond the U.S. to explore international options

NEW STAKEHOLDERS

One key way to expand the market is to identify new types of participants, including utility executives, financiers, wind and solar manufacturers, and transmission line developers, many of whom got to sit down face-to-face with corporate buyers for the first time, and to better understand the rapidly expanding and demanding customer base. We held a discussion with financiers about what corporations want, and how that impacts the bankability of projects. Our partners WWF and WRI led conversations with utilities extending their product offerings and working with, not against, other market participants to find options for renewable energy purchasing. Finally, looking beyond the value chain, we engaged manufacturers, including turbine producer Vestas, and transmission-line developers such as Clean Line Energy, that are helping to improve the grid so that more wind and solar can be transmitted easily and reliably from where the wind blows and the sun shines to where customers need it.

In addition to new types of participants, REBA saw more buyers and sellers that have recently joined the community, either as members of the BRC or of one of the other REBA partner initiatives, the Corporate Renewable Energy Buyer’s Principles and Future of Internet Power. In fact, just last week, BRC announced its 100th member, Mars. A full list of companies in attendance can be found here.

New Solutions

RISK ALLOCATION 

As new corporate buyers enter the market to purchase renewables, they are keen to understand any potential risk exposure. Not long before the REBA summit, the BRC published a primer to assist corporate buyers in understanding the various risks attendant on long-term, large-scale power purchase agreements (PPAs) and the ways those risks can potentially be allocated. Attendees further explored risk in several sessions during the summit.

REBA summit attendees’ discussions ranged from specific allocation questions in the market today (including topics like, “who is most appropriate to carry basis risk between the project’s bus bar and the hub?) to considering future deal structures and products that might become viable, such as PPAs without fixed prices, price insurance, and hedging products. Attendees considered these questions from the perspectives of both of the parties who ultimately determine the fate of the deal: the corporate buyer’s CFO and the project developer’s external financier.

Themes that emerged from these discussions were some buyers’ willingness to pay a premium in order to avoid risk, the potential role of market intermediaries, many buyers’ continuing preference for shorter-term deals, and the need for resources to properly address common concerns posed by CFOs.

ONLINE MARKETPLACE

REBA summit participants were also able to review and discuss various features recently added to the BRC Marketplace that will help increase transparency in the corporate renewable-energy purchasing market. The BRC Marketplace is an online platform modeled after sites such as Zillow, Yelp, or TripAdvisor that provide consumers with a database of easily searchable offerings from sellers. The BRC Marketplace makes transactions easier by allowing corporate buyers to:

• Search the 60+ available projects in the system—totaling over 11 GW of capacity from 25 different developers—to identify projects of interest
• Review a database of about 50 completed transactions to understand historic trends
• Submit project requests using a streamlined request-for-information process
• Browse company profiles to identify potential counterparties and consultants

Moving forward, the BRC team plans to add features to help companies evaluate the economics and the potential greenhouse gas reductions of various projects.

SOLUTIONS FOR SMALL BUYERS

Smaller corporations, nonprofits, and other sources of energy loads outside of the Fortune 100 or even the Fortune 500 represent a large market for off-site renewable energy in the U.S. However, these entities often lack the credit, capital, risk appetite, accounting sophistication, market access (for those in regulated states), or sufficient load to access off-site renewable energy products.

To address this challenge and continue to help the market grow, several intermediaries have entered the marketplace that are capable of signing long-term PPAs and carving them up into products with shorter terms, smaller volumes, and simpler contracts. This will help to bring off-site renewable energy products to nontraditional off-site PPA customers. Several companies actively exploring this intermediary model attended REBA and explored challenges facing this business model, largely having to do with additionality (i.e., getting new renewable energy capacity built vs. taking credit for renewables that are already on the grid), matchmaking between supply and demand for aggregated deals, and contracting complexity.

GOING GLOBAL

The U.S. market has dominated the renewable-energy purchasing market for corporations, but every company is global, and with that follows a global appetite for renewable energy. Corporations with global supply chains and global value chains—including brand-driven companies such as Procter & Gamble and Mars as well as companies in sectors like pharmaceuticals and industrials—are exploring the feasibility of procuring power in regions of the world where renewables will offer economic benefits. While India and China are of top concern as carbon emitters, most companies are concerned with their supply chains and are deciding where renewable energy will go on that basis. Countries such as Ireland, Vietnam, and Taiwan emerged.

MANY MILES TO GO

This is a dynamic market: new buyers and sellers are joining every day, and the priorities of buyers who have signed one or two deals are changing to include tackling new geographies, whether those are regulated states or other countries. The BRC’s buyers, sellers, and intermediaries support the growth of this market, and we are committed to partnering and engage with all of them to identify and take advantage of innovative market opportunities. Because the market moves rapidly, the corporate renewable energy community will be gathering again on November 17–18, this time in the heartland of the country, where General Motors will welcome this renewables movement.

The market has great opportunities, but hard work is needed to achieve a 60 GW goal—the market needs to expand to include new buyers, new deal structures, de-risked solutions, and new international geographies.

As Brad Smith, president of Microsoft, indicated in his new blog on renewable energy, “The progress that’s needed will not come easily. The issues are complex and the steps that are needed are varied. Real progress will require that groups across the non-governmental, business and governmental communities find new ways to work together.”

Last week’s event was proof that this new community has the energy, the clout, the willingness, and, most importantly, the capital needed to address these challenges to build a more stable and collaborative market. Welcome to our new chapter of corporate renewable purchasing.

Photos courtesy of Keith Arnold, WWF.