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ONES TO WATCH: Renewables and the growth of corporate power

Non-utility procurement of wind and solar energy will surge to record levels in the US in 2016, led by multinational corporations that are using their market clout to also help drive demand in Europe, Latin America and elsewhere.

Analysts say greater involvement by big corporate brand names such as BMW, Coca-Cola, McDonald’s, Nike, Starbucks and Walmart will attract billions of dollars in capital for clean-energy development, create thousands of supply-chain jobs and stimulate rural economies where many large projects are located.

It will be a break-out year for a segment that has potential to consume massive amounts of renewable energy globally, as long as generators can continue to offer price-competitive supply options and reliable delivery where markets permit. The private sector accounts for at least half of the world’s electricity consumption.

US developers, for example, could sign contracts with corporate and municipal buyers for 5.5GW of wind and solar, versus 4.1GW last year, 1.2GW in 2013 and only several hundred megawatts in 2012, according to analysts.

“In the last quarter, we’ve seen an unbelievable number of new requests for pricing from the corporate sector. You’ll see a bunch of those deals announced as they get completed and closed,” says Kevin Helmich, managing director of Midwest and Eastern origination at Iberdrola Renewables.

There will be plenty of wind energy available this year in the US, as more than 13GW of capacity was under construction at the end of third quarter of 2015, with an additional 4.1GW in advanced stages of development, according to the American Wind Energy Association.

For solar, Boston-based GTM Research estimates that deals involving large off-site facilities will increase tenfold to 1GW in 2016, with rooftop net-metered projects adding a similar amount.

“This corporate procurement segment ranks as one of the highest growth opportunities for solar right now in the country,” says senior analyst Cory Honeyman.

Cost savings and predictability are the primary reasons why US companies and institutions are buying more renewable energy, despite the complexities that can be involved in negotiating and financing contracts. Wind costs have dropped 66% since 2009.

Another growing motivation is sustainability. “We’re going to get renewable energy any way we can, no matter what it takes,” says Michael Terrell, energy lead for the global infrastructure team at Google, which claims to be the largest corporate purchaser in the world with 2GW.

This year will see a quantum leap in corporate sustainability commitments. About 60% of the 100 largest US companies by sales have set goals for renewable-energy procurement, greenhouse gas emissions reductions and energy efficiency, according to Ceres, a non-profit sustainability group.

“These are large consumer-facing companies that want to be seen and their customers want to feel that they are part of the solution and not part of the problem,” says Gregory C. Staple, chief executive of Renewable Power Direct, a Washington DC-based wholesale green power provider.

Their leadership role is getting noticed by peers. “You do see a number of competitors within any industry starting to move in the same direction. The snowball of additional interest seems to be really rolling right now,” says Helmich.

Emily Farnsworth, campaign director for RE100 — a global initiative that has obtained pledges from 53 mainly European and US companies to source 100% of their power from renewables — has “no doubt” others will join in 2016. “We’re talking about the world’s most influential companies, which, as well as going renewable in their own operations, can help their supply chains and customers to switch too,” she says.

Corporate procurement has been slow to develop outside the US for several reasons, including a lack of creditworthy off-takers, forced curtailments, low fossil-fuel tariffs for industry, regulatory risk, state grid monopolies and subsidy uncertainty. But those problems are expected to ease as countries become more willing to provide cleaner power, grid upgrades and more market-oriented policies.

Analysts cite Mexico as an example of where such steps have been taken, sparking a flurry of corporate off-take deals that will continue this year. GM, Nissan, Volkswagen, Nestlé, Walmart and local cement producer Cemex are leading the way there. 

After the US, the UK is seen as the next largest market for off-take contracts this year, followed by South Africa, Mexico, China, India, Germany, Brazil and Canada, according to market players surveyed in December by Chicago-based law firm Baker & McKenzie.

“The corporate renewable PPA [power-purchase agreement] market started in the US but we are now seeing it more in the UK and mainland Europe,” says partner Weero Koster. “This is partly because corporates are taking their corporate responsibility extremely seriously and are not only interested in buying certificates of origin and green certificates, but also really want to be involved in the development of renewable power.”

This extends to small and medium-sized firms that are banding together to form consortia in an effort to overcome their lack of expertise to create enough power demand to make PPAs feasible, he adds.

ONES TO WATCH is Recharge’s exclusive series of insights into the trends, policies, companies and individuals that will shape wind and solar in 2016.

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