Green Business

What’s hot in corporate renewable energy procurement

Written by pgex7

From a global pandemic to extreme weather events, supply shortages and a global energy crisis, it’s been a wild couple of years. The uncertainty and instability has bred innovation among corporate energy buyers: Not only are those with experience exploring and using a broader range of contract types, but a broader range of companies of all sizes have gotten more comfortable with taking the plunge into renewables procurement.

That’s according to “State of the Market,” an annual report from the Clean Energy Buyers Association (CEBA) that identifies top trends from the energy deals inked by US-based corporations. CEBA, an advocacy organization that aims to accelerate corporate clean energy deployments and decarbonize the power sector, also draws wisdom from its member organizations, which includes climate trailblazers such as Google, Amazon and Meta. In this way, the “State of the Market” report isn’t a trailing indicator — it’s a bellwether for what the leaders of the pack are thinking, and it sets the tone and priorities for companies’ clean energy strategies in the year to come .

Here are some of the year’s top trends, shared from the main stage this week at the CEBA Spring Summit in Detroit.

Smaller energy buyers are entering the market

Despite market uncertainties, 2021 was a record-breaking year for renewable energy procurements, according to the CEBA deal tracker. Last year, corporate procurements reached 11.07 gigawatts, up from 10.73 GW in 2020.

CEBA Capacity slide

Notably, of the 50 companies tracked last year, 26 were new to the market. For new buyers, the median project size was smaller at 51 megawatts, compared to the overall median capacity of 80 MW per company.

The reasoning, according to David Haines, senior vice president of strategy and impact at CEBA, is because of a cultural shift that is emphasizing the imperative to decarbonize.

“We’re seeing a shift in sentiment … in customers, investors and employees,” Haines said. “Customers are asking harder questions about where their products are coming from, how their services are being provided. Investors are asking questions about risk, about how you’re managing your carbon. Employees are asking questions about their employers. this?”

Key to the ability of more companies to participate is new partnerships and innovations in renewable electricity procurement. For example, last year saw a record-breaking four aggregation deals, a structure by which multiple offtakers enter a single agreement. Not only was that the most for a single year, those deals included 13 companies — the most customers in a single year tracked to date.

More energy buyers are working with utilities on clean energy deals

Most corporate procurements occur in organized wholesale energy markets, deregulated markets that allow energy producers to sell in bulk to offtakers without a utility intermediary. In 2021 through the first quarter of 2022, 75 percent of contracted renewable capacity from corporations was in wholesale markets, and CEBA has been working with members to expand organized wholesale markets to open new procurement opportunities.

CEBA Markets

Clearly, wholesale markets continue to be an important underpinning of procurement deals. Yet compared to prior years, the percent of projects in wholesale markets was less.

In regions without wholesale markets, corporations can work with utilities to sign a green tariff or a bilateral deal to meet clean energy demands. Last year saw a remergence of these types of utility partnership, accounting for 32 percent of the corporate procurements — the highest level since 2018, according to CEBA.

CEBA Utilities

Utility partnerships can help to serve more types of companies, with the ability to offer smaller capacities. Utility partnerships can be more simple than traditional procurement contracts, requiring fewer soft costs and less risk. That makes these arrangements well-suited for new entrants, of those with smaller energy needs.

Companies are optimizing for carbon impact

Increasingly, companies are considering where and when clean energy is generated to ensure procurements are aligning with emissions reductions commitments.

Clean energy leaders including Google and Microsoft have set targets to run operations off clean energy around the clock, a practice known as 24/7 carbon free energy (CFE). Thousands of other organizations have science-based targets tied specifically to decarbonization commitments.

Evidence that companies are prioritizing emissions reductions may be seen in the rise of battery storage being included with renewable electricity procurements, allowing for deeper decarbonization and more resilience. CEBA tracked 400 MW of battery storage contracted by commercial and industrial customers last year.

CEBA energy storage data

[Interested in learning more about the electrify-everything movement? Join leaders from the private and public sectors, utilities, solution providers, investors and startups at VERGE Electrify, online July 25-26.]

About the author

pgex7

Leave a Comment