Five US companies signed agreements for a joint 42.5MW solar energy deal, creating what they say is a new blueprint for corporates aggregating relatively small amounts of renewables demand to collaboratively enter into a virtual power purchase agreement (VPPA).

Until now, aggregation deals have involved a major off-taker as anchor tenant to allow a large project to get built. Several other companies will join to procure much smaller amounts of capacity to benefit from economies of scale the project offers, plus the lead buyer's often greater expertise with such transactions.

In this case, Bloomberg, Cox Enterprises, Gap, Salesforce and Workday formed the Corporate Renewable Energy Aggregation Group, and collectively will act as anchor tenant for a 100MW off-site PV project in the State of North Carolina. A unit of Germany’s BayWa is the project developer.

“The process of buying renewable energy through a PPA can be difficult and time-consuming, especially for buyers seeking smaller energy loads. Combining our resources as a single group of buyers has enabled us to scale our impact,” Michael Barry, head of sustainable business operations at Bloomberg, said in a statement.

He and officials at the other companies noted that the arrangement is a good example of a group sharing best practices, working jointly and showing the benefit that cross-company collaboration can have. LevelTen Energy employed its renewable energy procurement platform for the deal.

Aggregation of corporate customers also demonstrates to renewables developers that a potentially large market exists for these types of projects that could also include wind.

Developers expect aggregation of corporate customers to become more pronounced in the next several years and when this occurs, it will greatly expand both the solar and wind markets.

In this case, the group evaluated several mechanisms for aggregating smaller amounts of solar energy demand to afford them the collective buying power that is typically necessary to contract directly with a large off-site renewable energy project.

It chose as a solution a uniform VPPA contract and a single, shared legal counsel to negotiate and finalise the transaction, which helped streamline the final phases of the deal. Group members claim this structure kept transaction costs low.

With VPPAs, companies provide the financial hedges but unlike fixed-volume price swaps, no electricity sales occur with the project. In its simplest form, the project pays the per MWh floating price for a set percentage of electricity generated, and the hedge provider pays for the same amount of power per MWh at a price agreed earlier.

Project owners benefit as the hedge provides unit price protection for electricity generated. Companies also benefit financially and usually obtain the environmental attributes, often renewable energy credits.