Key Trends: Corporate Renewable Energy Procurement and Spend 2016

The U.S. private sector is mobilizing around clean energy, according to findings of a new research report released on October 18 by the World Wildlife Fund (WWF) and the Corporate Eco Forum (CEF).

Indeed, the accelerated deployment of renewable energy by American businesses could play a significant role in the USA’s ability to meet emission reductions targets set forth in the Paris Agreement. The agreement, which will go into effect on November 4, brings all nations into a common cause to undertake take ambitious efforts to combat climate change and adapt to its effects, with enhanced support to assist developing countries to do so.

The study, “Corporate Renewable Energy Procurement: A Snapshot of Key Trends, Strategies, and Practices in 2016,” draws on insights from 37 companies that are members of the Corporate Eco Forum  and/or have signed on to the Renewable Energy Buyers’ Principles that the forum has created

With more than 1 million members in the United States and close to 5 million globally, the WWF advocates on behalf of conserving the world’s animals and their natural habitats.

CEF is a by-invitation membership organization comprising large, global companies – including Alcoa, Boeing, Disney, Facebook, Google, Hewlett Packard, Wells Fargo, and more – that demonstrate a serious commitment at the senior executive level to environment as a business strategy issue.

Overall findings

Among the broad findings of the survey are the following:

• Ambition is increasing: More than half of companies surveyed have set a renewable energy target, with approximately half of those targets for 100 percent renewable energy.
• A trend toward direct procurement: Respondents are moving from indirect forms of procurement ,such as unbundled renewable energy credits (RECs) to direct procurement, such as offsite power purchase agreements (PPAs)
• Wind has become key to scale: Wind is the top source of renewable energy, accounting for more than half of overall procurement.
• Companies want access to offsite PPAs: Companies are pursuing a wide variety of policy instruments to increase access to renewable energy options, but distinctly prioritize access to offsite PPAs.
• Companies have idenitified priority states: Respondents have identified California, North Carolina, New Jersey, Texas, and Virginia as the highest-priority states for renewable energy policy activities.
• The specifics of the Clean Power Plan (CPP) are a barrier to engagement: The majority of companies surveyed would like to encourage state-level utilities to design programs that meet their renewable energy procurement needs while complying with the Clean Power Plan, but only one-third of surveyed companies feel prepared to speak about the CPP more broadly. A knowledge deficit exists around the CPP and how it will impact corporate RE procurement.

Preferred financing instruments

In the procurement of renewable energy, companies in different sectors are apt to prefer dissimilar financing instruments – among them:

• Physical PPAs are the primary instruments used by Information Technology (IT) and Retail.
• Unbundled RECs are heavily in the Retail sector, but their use is evident in all examined sector; particularly IT, Manufacturing (Mfg), and Other Services.
• Onsite and offsite self-owned renewables are most prominent in Health Care, Consumer Products, and Manufacturing.
• Virtual PPAs are playing an important role in Consumer Products and Manufacturing.
• Utility green tariffs are being used most by the Consumer Products sector, followed by IT, Retail, and Other Services companies located in regulated states. However, this procurement type represents a low overall share since green tariff offerings are still limited. Green tariffs are expected to grow over the next 12 months, as some utilities are expressing more interest in meeting customer demand for renewable energy.
• Community or shared renewables are the least popular instrument used to purchase RE across all examined sectors. Companies are somewhat limited in their use of this procurement instrument, as only 14 states and the District of Columbia have shared renewables policies in place and procurement volumes have been restricted in most programs.

Payback periods

Finally, averaged across companies and sectors, respondents report that wind- and hydro-based energy sources are delivering the shortest payback periods (5.9 and 6 years, respectively).

Solar PV is not far behind, with an average payback period of 6.3 years. Wind and solar PV are the most common sources invested in, with all other renewable sources combined just equaling the amount of wind procured.

Although there were very few respondents who reported payback periods for biofuels or geothermal, these two sources appear to have the longest payback period, with both being at least 10 years.