A who’s who of multinationals than now includes Ikea, Apple, BMW, Coca-Cola, Goldman Sachs, HP and Starbucks have pledged to source their power purely from renewable energy plants by 2020 or 2030 – with Google having passed this milestone already this year, ahead of schedule.
Ahead of next month’s Re-Source event in Brussels, Darius Snieckus spoke with Gary Demasi, the technology giant’s director of data centre energy & location strategy, about the economics and sustainability promise of corporate renewable energy (CRE) in powering its ever-growing fleet of data centres – and helping to slow climate change.
Just as renewable energy is reinventing global power paradigms through a build-out of wind and solar power that together should reach 4,500GW by 2030, so too it is spurring a rethink of financing models, from green bonds to crowdsourcing. The rapid growth of CRE in Europe and the US suggest it will play a fundamental role in helping finance the Energy Transition. What is Google’s view?
Corporate renewable energy purchasing will certainly continue to be a critical driver of the buildout of global renewable energy models. Compliance mechanisms like renewable portfolio standards are no longer the sole primary driver of the growth in renewables. Indeed, renewable energy prices have come down tremendously in recent years, making renewable energy purchasing a very cost-competitive proposition; in a growing number of markets, renewable energy is the lowest cost electricity resource available on the grid, making it quite literally the cheapest source of energy available.
Corporate renewable energy purchasing plays a key role in driving the growth of the renewables sector. By providing developers with a guaranteed revenue stream through a power purchase agreement, corporations are able to provide a key financing method that developers can use to obtain lower cost capital for projects.
Combined with declining commodity costs and increasingly efficient generation technologies that benefit from economies of scale, these forces are helping to propel a cycle of growth in the sector.
Financing structures for corporate renewable energy purchasing will continue to grow and evolve over time. We expect that aggregation deals (for instance, the Dutch Consortium deal we are a part of with three other corporate offtakers) will become increasingly common method of bringing renewable energy to market.
Further, more and more corporations will take renewable energy procurement upon themselves, particularly in competitive retail markets, to purchase renewable energy through direct access structures that tie purchasing directly to the customer’s retail energy bill.
In Europe, corporate PPAs tripled in the last year to 1.6GW of capacity; in the US, the Renewable Energy Buyers Alliance is underpinning corporations’ plans to source an additional 60GW of renewable energy by 2025; even in the Gulf Cooperation Council states, corporations can now buy I-RECs as part of their sustainability programmes. How much near-term growth in CRE will be down to investment-friendly policy frameworks – or will corporates be won over by the ever-improving economics of wind and solar power (independent of government support)?
Both of these factors have an important role to play in scaling up corporate renewable energy purchasing. Our experience at Google has been that competitive wholesale and retail markets have provided the fastest path to purchasing renewables.
We expect that regulatory policy frameworks around the world will continue to become more competitive, more customer-centric, and more agile. This enhances the business case for corporate renewable energy purchasing by creating more direct access to obtain the favourable, fuel-free economics of renewable energy sources.
Different CRE models are emerging. The long-term industrial approach in which a corporate enters into a long-term purchase agreement with a developer, providing a guaranteed revenue stream that they can use to independently obtain financing for the project, like Google; offsetting energy consumption costs through using facility roof space for PV generation, as with Ikea, GM and Walmart; and wind and solar plant-linked PPAs, such as Amazon and Apple favour, as an insurance of price certainty. Are we likely to see these models evolve, and if yes, how?
If we are to enable every company to have the option to purchase renewable energy for their operations if they desire, purchasing models will indeed need to evolve. Many companies do not have the appetite for large, long-term deal structures, nor do they always have the internal expertise to negotiate complex power purchase agreements.
We’ll need to enable smaller "bite-size" projects that have shorter terms, in which less risk falls to the offtaker and more is managed by the developer or retail provider. And we’ll need to create “buy as you go” programs that small and medium-sized enterprises can utilise.
The RE100 – a global initiative of high-profile corporations committed to 100% renewable electricity – reached 100 members recently but these are considered by the Climate Group to be the “easy ones” as they are largely low-emitters. How does government and industry bring in those large-emitter corporations – oil and gas refineries, mega-factories and chemical and fertiliser plants – that could further speed up the global renewables build-out, and also join the battle against climate change, if they were to become 100% renewables-powered?
The continuing cost declines in renewables make it smart business for many companies in many sectors. If we continue to make it easier for companies to purchase renewable energy, more companies will get in the game.
The ultimate challenge for our Anthropocene Epoch is that of needing to rapidly lower industrial emissions levels to the point where the worst impacts of global climate change will be averted. How central will CRE be to reaching the Paris Accord ambitions?
The threat posed by global climate change is an urgent global priority. Reducing greenhouse gas emissions to the levels necessary to mitigate humanity’s impact on the climate will require a truly global, cooperative, sustained effort across many geographies and many sectors. Renewable energy purchasing will be one of many ways in which corporates will continue to drive adoption of low-carbon technologies and reduce GHG emissions.
