Renewable energy procurement trends: The curse and the boom

September 29, 2017

Companies are expected to drive increases in renewable energy procurementBy most accounts, signs are pointing to a rapid expansion of corporate renewable energy procurement. An article published by Green Tech Media summarizes these positive trends, as well as a cautionary note about what could slow renewable energy demand.

Increased adoption of corporate sustainability goals is cited as one indicator pointing to an expansion of the corporate renewables market.  (There are currently over 200 organizations committed to going 100% renewable as part of the RE100 campaign.)

According to the article, as of 2017 63% of Fortune 100 companies had sustainability goals, followed by 39% of the Fortune 500. And that lower number is expected to continually increase as large corporations lead by example and by policy.

From the article

Diversification is a growing trend, though. One trigger is that large companies are starting to demand sustainability measures be met across their supply chain.

After spiking in 2015 amid concerns that various incentives (like the Investment Tax Credit) may expire, the growth in demand for corporate renewable energy is back on a steady track. Renewable energy demand in 2016 called for an additional 1.61 gigawatts of clean energy (which is estimated to be enough electricity, on average, to power over one million U.S. homes). In 2017, additions to solar PV outpaced the net growth in coal for the first time ever.

There’s another trend outlined, however, that has the potential of casting a chilling effect on the otherwise-rosy outlook for corporate renewable energy purchasing. It’s described as the “winner’s curse”—an auction term referring to a winning bid that is higher than the value of the item won. In some areas of the country, there is a disconnect between the price and the value of renewable energy projects. While the cost of producing sustainable energy may be low, the overall price of energy in the area may also be relatively low.

The article warns of false expectations: 

The expectation is that the wholesale market prices will be higher than the PPA [power purchase agreement] price, or that they will increase over time, and the corporate buyer will save money on the whole. But those savings aren’t always there...

Corporate buyers need to look past the bottom-line price for producing renewable energy and view renewable energy procurement in the same way as buying real estate—it’s all about location. If the energy is produced at $50 and the local market value is $60, it’s a better deal than obtaining electricity produced at $25 when the market value is $20.

Despite the possible challenges and risk, the article concludes corporate America is on the verge of a renewable energy procurement boom. In every state, there is at least one incentive or program (and often more) available that promotes sustainable energy. These range from green pricing, green tariff and direct access programs (where utility customers are allowed to purchase electricity from a competitive power provider), to more direct incentives such as Renewable Energy Certificates (RECs). (To see where your state ranks in supporting renewable energy, click here.) With that kind of support and opportunity, growth in renewable energy procurement is all but inevitable.

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