Renewable Energy Markets 2018 – U.S. corporate renewable energy purchases should exceed 5 GW by December, according to the latest RMI data.
Julia Piper is a senior editor at GreenTech Media covering the energy transition. He is also the host and producer of the Political Climate podcast. He has previously written for E&E publications and covered clean energy and climate change issues in the United States and internationally, including India, Haiti, Israel and the Maldives. He holds degrees from McGill and Columbia University. Find him on Twitter @JMPyper.
U.S. corporate renewable energy buyers have set a new annual record and more growth is yet to come.
As of August, non-utility buyers announced contracts for more than 3.5 gigawatts of renewable energy projects in 2018, setting a new U.S. annual record that exceeds the previous record of 3.12 gigawatts set in 2015, and 2.89 gigawatts. Gigawatt declined in 2017.
Since then, the number of purchases has continued to rise as the corporate renewable energy market develops and expands to include new regions and new buyers.
U.S. corporate buyers have purchased a total of 4.81 gigawatts of renewable energy this year, and that number is expected to top 5 gigawatts by December, according to the latest data from the Business Renewables Center, a member program of the Rocky Mountain Institute (RMI).
The total number of commercial and industrial renewable energy contracts will be even higher as the RMI figures only refer to contracts for large off-site renewable energy projects. This means rooftop solar projects deployed by companies such as Ikea and Target are not included in the RMI negotiation tool, which was updated this week at the Renewable Energy Buyers Alliance conference in Oakland, California.
According to BRC Program Manager Kevin Haley, there are two main reasons for this. First, there was strong ongoing support from large technology companies with a heavy load on electricity. Facebook and AT&T, for example, bought the latest renewable energy capacity in 2018, along with other big deals with Microsoft, Apple and Walmart. The second reason is that the pool of corporate clients is starting to expand.
“A large number of new buyers continue to enter the market,” Haley said. “Much of this growth is driven by companies that haven’t closed a deal yet.”
In fact, 2018 also set a record for the most new buyers in a single year. About 20 new corporate buyers entered the renewable energy market this year, while the total number of unique buyers this year was just 70.
Companies will face some pressure on renewables this year as the federal solar investment tax credit and the wind energy tax credit are phased out over the next few years. But, according to Haley, at the moment this is not the main driver of growth.
“It’s still very much market interest, new buyers and the like,” he said. “But we expect companies to want to lock in lower prices when PTC [and ITC] expire.”
Many companies are serious about 100% renewable energy because they see it as good business, not just today, but in the long term. At the time of publication, 152 companies of all sizes have pledged to use the 100% renewable RE100. Big names like Apple and Google have already achieved their goals, while other companies are looking to the future, some even as far as 2040. This chart shows that companies are looking beyond today’s prices and current market opportunities.
“I think this is what they think is achievable as power purchase agreements and other transactions become more streamlined, easier to use and risk free,” Haley said.
He added “when they look at the future of the grid and the future of politics and what the potential impact of a carbon tax could be on their business.” “This is where companies look further and say, ‘This makes business sense.'”
In the interest of reducing the risk of renewable energy contracts, Microsoft this week announced a new way to make corporate power purchase agreements (PPAs) less complicated. Microsoft and co-developer REsurety, along with partners Nephila Climate and Allianz Global Corporate & Specialty, called it the Volume Farm Agreement (VFA).
“VFAs are designed as a simple solution to a core problem with renewable energy PPAs, which is that these contracts expose the buyer to all the weather-related risks of power generation, and the inherent nature of wind and sun means every hour, according to a Microsoft blog post. .
The variability of renewable energy sources is a challenge for corporate buyers. But what is undesirable to buyers is attractive to insurance companies whose core business revolves around managing weather-related risks. VFAs work on top of a new or existing PPA and are effectively designed to pay the corporate buyer when they get less renewable energy than contracted and pay the insurer when they have more.
In addition to co-development of this solution, Microsoft is an early adopter of VFA and looks to use VFA to integrate renewable energy generation and offset hourly costs.
“We all know that renewable energy without storage is an unstable commodity, and this could affect how the Microsoft PPA performs in the long run,” Haley said. “What they’ve done is lower the performance of these PPAs, essentially with an insurance product rather than core performance.”
This VFA launch is a testament to the maturity of the corporate renewable energy market. Another sign of this is Google’s recent announcement that the company is constantly looking for ways to harness zero-emission energy.
Last year, the tech giant secured 100% of its annual electricity consumption through renewable energy purchases and decided to continue doing so as the company grows. Last week, Google built on the idea of 100% by releasing a carbon heatmap that shows there are times and places where Google’s electricity profile is still not completely carbon-free, which is what Google wants.
“[The maps] suggest that our goal of buying 100 percent renewable energy — which depends on buying extra renewable energy when it’s sunny and windy to make up for the lack of renewable energy in other situations — is an important first step towards achieving this. . A completely carbon-free future,” Michael Terrell, head of energy markets at Google, wrote in his blog. “Ultimately, we strive to always, always have carbon-free energy for our operations.”
Going carbon-free “will not be easy,” Terrell added, “but the urgency of climate change calls for bold decisions.” Google has released a discussion paper outlining some of the key actions it and others can take to achieve 24×7 carbon-free energy.
RMI’s Haley notes that not all companies are ready to think about using renewable energy sources. Especially since there is still a lot of work to be done to open up the corporate market to new buyers and new locations.
American corporate contracts are starting to appear in more states. Over the past decade, 26 states have entered into corporate renewable energy agreements. In 2018, Utah became the latest new state to host its first renewable energy startup.
The expansion is largely due to policy innovations that have opened up opportunities in the regulated electricity market. The number of corporate renewable energy contracts signed under the utility’s green tariff program continues to grow, accounting for nearly 25 percent of corporate renewable energy purchases this year. At the same time, utilities are including corporate renewables in their long-term plans and are considering solutions beyond feed-in tariffs to better meet the needs of existing corporate customers and small loads.
2018 shows that serving small corporate customers is key to the continued growth of corporate renewable energy as a whole. According to Haley, on this front, the team has become a promising structure for awarding contracts.
Simply put, this model allows companies of any size to enter into contracts for renewable energy. In August, Apple, Akamai, Etsy and Swiss Re announced an agreement to build two new wind and solar farms in Illinois and Virginia using this approach.
Working together, smaller buyers can benefit from economies of scale, while larger buyers can benefit from cost benefits as they reach their renewable energy goals. Consolidation allows companies to make mutually beneficial deliveries with relatively little overhead. So RMI thinks this is “the start of a trend,” Haley said.
He added that RMI spends a lot of time with smaller corporate buyers helping them get to market. As major leading companies move closer to 100 percent renewable energy, “we want to make sure this isn’t the end of the story,” Haley said.
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