A Better Question for Corporate Renewable Procurement

Christine Vargo / December 20, 2019 / Energy Solutions

“It’s not that I’m so smart. But I stay with the questions much longer.”  –Albert Einstein

Throughout history, the greatest minds have possessed a unique ability to confront the status quo and ask, “What if?”

The status quo in corporate renewable procurement has been large corporates signing PPAs for large projects. The drawback of this state of affairs is that it excludes many corporates with smaller energy needs from fully participating in renewable energy solutions.

We asked: What if there was a better offering that enabled corporate renewable procurement for the masses? This exploration led us to help bring to market two innovative contract structures: the portfolio approach and the aggregator approach.

Innovative Contract Structures

The most complicated part of procurement for corporates with smaller loads is finding renewable offerings that fit the size of their energy needs. These companies have traditionally been unable to contract cost-competitive energy from large off-site renewable energy projects due to their limited energy demand. To unlock corporate renewable procurement for this next level of buyers, we sought contract approaches to meet their unique needs.

A Portfolio Approach: Meeting Localized Energy Needs

A major coffee company needed a way to procure volumes of renewable energy across local markets after committing to operate “Greener Stores.” The answer was an unprecedented “portfolio approach” crafted in partnership with LevelTen Energy. BayWa r.e., alongside two other suppliers, delivered the localized energy needs in PJM via a three-part renewable energy project. The PPA will supply approximately 50% of the total volume of energy from our 100 MW Fern Solar project in North Carolina and we expect to begin supplying power in 2020. Contractual flexibility—the freedom to procure in a more customized manner—is required to meet unique needs like localized commitments.

An Aggregation Contract: Right-Sizing Energy at a Competitive Price

In a recently signed a VPPA, 42.5 MW of the remaining volume of this same solar project will supply five large global brands (Bloomberg, Cox Enterprises, Gap, Inc., Salesforce, and Workday). Brought together by LevelTen, this group defines themselves as the Corporate Renewable Energy Aggregation Group and have worked collaboratively since 2017.

This deal is the first time several brands have aggregated their energy demands to procure relatively small amounts of energy across the same project [in the U.S.]—enabling each to efficiently and economically progress their individual goals. Agreeing on a uniform VPPA and shared legal counsel streamlined the deal, keeping costs low.

What is most remarkable about this deal is that corporates who would not have had access to a VPPA due to credit ratings or limited load size were now able to procure their right-sized energy need at a price on par with utility-scale projects. Together, these aggregators function as an anchor tenant, enacting a “community solar for corporates” solution.

These deals demonstrate how the next level of contracting enables corporates to innovatively balance their renewable energy needs (location and shape of load), corporate credit, and risk appetite in a way previously unavailable.

Overcoming Hurdles

No matter the size of your company, there are common hurdles to overcome for successful corporate renewable procurement:

  1. Navigating complex regulatory environments
  2. Aligning internal energy procurement strategy and the available contract structures
  3. Understanding and selling through the financial implications

Corporates who lack a dedicated energy procurement resource feel these challenges most intensely. Simply put: energy procurement is not the primary business of many corporates trying to meet their carbon reduction goals.

Rebecca Sternberg, BayWa r.e. Solar Projects VP of Power Marketing, puts it this way: “Even if the entity can buy from the deregulated market, the contract structure is complicated to understand. You are replacing a typical, local decision (signing a short-term contract with your local utility) with a longer, complicated contract.” (Rebecca shares best practices on how to sell a complex contract to your internal decision-making team in this post).

What if it weren’t so complicated?

Navigating Global & Local Complexity

Corporate renewable procurement is complex. As a global company with a local presence across markets, we help corporates navigate the complexities of a virtual transaction in deregulated US markets; work collaboratively in regulated markets; and ultimately, build projects that add competitively priced green energy to local grids.

We have an extensive track record of building in front of and behind the meter, using multiple technologies to deliver integrated solutions, and in operating and maintaining sites to ensure the successful delivery of contracted energy. We not only focus on off-site PPAs but also look into corporates’ global needs for behind-the-meter energy solutions. These solutions are important for entities with a smaller load, and for those in countries where renewable energy sourcing via off-site PPA structures are not possible from a regulatory perspective. This contractual flexibility is paramount as each corporate requires a unique solution.

The Most Important Question

These “what if” questions we ask are essential to removing barriers for the next level of buyers. But even more important is asking: What if corporates could drive the reversal of climate change?

There has never been a more urgent question. The latest IPCC report calls for immediate action to limit warming to 1.5° C to divert the gravest climate impacts. To meet this goal, we need to reach peak global emissions before 2030. Yet we are on track to exhaust our carbon budget by this same date. Furthermore, investments in low-carbon technology and energy efficiency need to increase 5x by 2050.

Corroborating and building upon the findings of the IPCC, the UN released a report in January 2019. Co-author Gunnar Luderer says: “Only a rapid turnaround here can help.” But within the report is also a glimmer of hope: the critical role of nonstate actors in realizing national pledges. Multinational corporations, specifically, are in an incredible position to harness their resources and rethink corporate renewable procurement. This video further explains how corporates can drive the reversal of climate change, specifically with innovative new ways to procure.

What if… you started today? 

 

 

 

 

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