Clean energy is on the rise in America, and there’s no denying it. Each year, investments in renewable sources of power continue to increase, bringing with it economic and job growth. In fact, it’s on track to deliver an increasing share of total energy supply, putting traditional energy sources to the side. That’s why organizations across the country are turning to renewable energy as a way to meet their sustainability goals and cut energy costs.
We’re at a time when corporate America is stepping up to the plate on climate leadership. Bigger, more ambitious commitments are being set and bolder targets announced. And renewable energy can be the tool to meet them. But it means the scale and sophistication of clean energy projects must grow. Small-scale, on-site solar installations are not always large enough to generate the quantity of power necessary. So businesses are turning to another route: wholesale renewable energy procurement.
Companies often want to increase their amount of renewable energy, but are limited by facility, land or regulatory constraints. Navigating the various options and becoming familiar with the specifics can be a challenging and time consuming process. To get around some of these operational hurdles, an increasing number of companies are turning to larger volume wholesale procurement—taking advantage of industry economies of scale—as a way to add renewable energy to their portfolio.
The most common type of wholesale procurement is a power purchase agreement (PPA). A PPA is a long-term contract that enables developers to secure financing for renewable energy projects, allowing companies to save money on their energy costs by locking in predictable prices.
What’s so great about wholesale power procurement? The ability to construct large systems in locations best suited for optimization allow companies to benefit from greater scale and lower costs. It’s a lower-risk option, providing a reliable, predictable supply and cost for energy, and they typically require no upfront capital expenditure with a PPA. By having the systems off-site, facilities won’t be impacted and there will be greater flexibility in project design. And it’s continuously evolving with new models created, becoming a suitable option for even more businesses.
How it works: In a PPA, a third-part provider arranges for the design, permitting financing and installation of a system, and sells the power generated to the host customer at a fixed rate that is usually lower than the utility’s retail rate. Keep in mind the state pricing for PPA’s can vary widely. Through either a “physical” or “virtual” PPA, companies have the opportunity to scale nearly a limitless amount of electricity.
Earlier this fall, Anheuser-Busch, one of the country’s largest beer producers, announced a new PPA for 152.5 MW of renewable electricity, representing 50 percent of the company’s annual electricity use, up from the current amount of less than 2 percent of total supply. This is the company’s first utility-scale project, and it’s expected to significantly reduce overall emissions from its operations.
Make it right for you
For companies looking to pursue any type of PPA, internal preparation is key. It’s important that all necessary stakeholders are involved (facility management, legal, financing, accounting, etc.) to be aware of all the ins-and-outs of the process. Understanding how your company uses energy will have a big impact on the design of your procurement plan. Ensure there’s a good match for your site and identify all potential barriers that could interfere with the project before moving forward with it. Because not surprisingly, there’s no one-size-fits-all approach that will solve your energy problems.
But PPAs might not always be what’s best for your organization. Depending on the geographic location and site characteristics, on-site renewable energy or other financial instruments might represent the best savings opportunity, especially in states with high electricity tariffs, retail net metering programs, and good solar insolation (or access to the sun).
EDF’s Supply Chain Solutions Center is hosting a webinar on renewable energy procurement and how it can benefit your company. An expert from Forefront Power will lead the conversation.
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