Today, Rocky Mountain Institute’s Business Renewables Center released a report that highlights various corporate renewable energy procurement risks and their mitigation strategies.
Boulder, CO, January 15, 2019 — Rocky Mountain Institute’s (RMI’s) Business Renewables Center’s (BRC’s) 75-page report released today, titled A Corporate Purchaser’s Guide to Risk Mitigation, dives into five specific risks corporate buyers of utility-scale renewable energy commonly face—price, shape, basis, volume, and operational risk. It then reviews a range of mitigation strategies, including some that are widely available and some that are emerging in the market today.
“If your company has set a renewable energy target, then A Corporate Purchaser’s Guide to Risk Mitigation can help you better understand and manage the risks associated with renewable energy procurement,” said Dr. Nicola Piell-Moelter, Director of Sustainability Innovation at VMware (formerly at Akamai Technologies). “It’s also key to help suppliers better understand the unique challenges faced by this significant corporate market.”
The mitigation strategies detailed in the report are hub-settled contracts, floors and collars, proxy generation, volume firming agreements, fixed volume swaps, long-term renewable energy certificate (REC) agreements, project tranches, and contract tranches. The report also highlights best practices for buyers to contract for off-site renewable power in a way that meets their risk priorities.
“At Edison Energy, we advise our clients how to manage the long-term risk of renewable energy contracts for their competitive advantage while they meet their sustainability commitments,” said Jay Zoellner, CEO, Edison Energy, a BRC member. “This report lays out many of the tools available today to effectively control the exposure of future energy costs to technology development, regulatory change and new energy products.”
Power purchase agreements (PPAs) are the most common corporate renewable energy deal contracting structure and bring a unique set of risks for each counterparty. Five of the risks considered are specific to PPAs. Others of these risks are specific to the wholesale electricity market and are thus risks that corporate entities do not encounter in their core business operations. A lack of familiarity with these risks makes it all the more important for buyers to understand them, their implications, and the applicability of different mitigation options.
“As the corporate renewable energy market continues to grow, resources like A Corporate Purchaser’s Guide to Risk Mitigation are required reading for buyers, suppliers, and intermediaries alike,” said Erik Haug, Senior Manager, Business Development, Apex Clean Energy. “This report is key to expanding the market by helping all parties better understand the corporate renewables procurement landscape and by making transparent the potential solutions to mitigate risks.”
“Thanks to the diligent work of a collaborative team from the BRC and RMI, this report offers a comprehensive examination of the key risks and associated mitigation strategies emerging for corporate buyers,” said Denise Hugo, Director, Origination, Geronimo Energy. “The guide also incorporates valuable input from experienced corporate market stakeholders to provide the reader with real-world examples and scenarios.”
The full report is a BRC members-only product available on their website, http://marketplace.cfapps.io/pages/risk_mitigation_guide. An executive summary of the report is publicly available at https://rmi.org/insight/corporate-purchasers-guide-risk-mitigation/.
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