Fifth Third Bancorp announced that it has become the first Fortune 500 company and first bank to sign a power purchase agreement to achieve 100% renewable power through a single project. Furthermore, Fifth Third becomes the first publicly-traded company to commit to purchase 100% renewable energy through solar power alone.
This power purchase agreement will lead to the construction of an 80-Megawatt (MW) solar project in North Carolina. The Hertford County Aulander Holloman solar facility is an approximated $200 million project that will be designed, built and owned by Mooresville, North Carolina-based SunEnergy1. It will employ approximately 1,000 people during construction, generate roughly 194,000 MWh/year of electricity and help avoid 144,000 metric tons of greenhouse gas emissions per year.
Energy Manager Today interviewed Scott Hassell, Fifth Third’s vice president and director of environmental sustainability, regarding the news.
Is your PPA saving money/making the bank’s operations more reliable?
We conducted an extensive economic analysis of the projects submitted to our RFP. We looked at a range of scenarios for electricity prices to understand the risks of this contract. Based on that analysis, we believe this contract will have a positive impact on the bank over the life of the contract. We expect the long-term deal to be additive to our earnings. In terms of saving money and the impact on our energy expenses, we’ve created a fixed price for our energy so we have created a hedge so to speak. It will reduce volatility in our utility expenses.
How did Fifth Third make the decision to sign a PPA?
Since 2010, Fifth Third has purchased renewable energy credits (RECs), which is a way to support existing renewable energy projects and get credit for a percentage of renewable power. Since 2012, we have purchased 30 percent RECs, or put another way, 30% of our total expected electricity use in a year. That was all positive, but what we’ve wanted to do for years is to make a new renewable project happen and we began looking for ways to do that in 2014.
In 2016, we began to feel like we could really do it in a cost-effective way and began working with Renewable Choice Energy (now Schneider Electric) to learn about PPA opportunities. In 2017, we issued requests for proposals (RFPs) to 39 renewable energy developers. At the same time, we also set and publicly announced five bold goals for sustainability — one of which was to achieve 100% renewable power by 2022.
After a rigorous selection process, we selected SunEnergy1’s Aulander Holloman Solar project based on the project being located within our footprint and its expected economics, timing, risk profile and its location in North Carolina, one of our key market states. The PPA contract means that Fifth Third is guaranteeing that we will pay SunEnergy1 a fixed price for the power the project generates and we will purchase all of the RECs from the project, which enables us to claim 100% renewable power when the project comes online in December 2018.
How did Fifth Third put together the PPA?
We have signed a Virtual Power Purchase Agreement. This means we have guaranteed to buy the power from the project, but we will re-sell it in the regional electricity grid rather than use it ourselves. Another term for this transaction is a fixed-for-floating swap, where fixed refers to the price Fifth Third has guaranteed and floating is the regional electricity market price. On a monthly basis, Fifth Third and SunEnergy1 will net settle the difference between the fixed and floating prices that occurred over the prior month. The term swap is used because the contract allows the developer and Fifth Third to swap power prices with each other in ways that benefit both parties. The developer gets a fixed price for power that they can use to get a loan. Fifth Third gets a floating price for power that we believe will benefit the bank while advancing our environmental goals.
Fifth Third is buying the power and the Renewable Energy Certificates (REC) generated by this facility for a fixed price. Using our contract, SunEnergy1 will get loans and build the project. When the project begins generating power, the power will be sold into the regional electricity grid at the floating price. Every month, Fifth Third and SunEnergy1 will financially settle the difference between the fixed price guaranteed by Fifth Third and the floating price obtained in the regional electricity market. By guaranteeing to purchase all of the power and retaining all of the RECs from the project, Fifth Third is not only purchasing 100% renewable power, but we have directly led to the construction of this new 80 MW solar project.
Were there any specific challenges you overcame, or lessons learned in doing this kind of deal?
Yes, many. PPAs are complicated projects involving multiple teams from within Fifth Third and outside of our company with advisory partners. It was a long process, but one we were committed to given that we felt achieving 100% renewable power in a way that could be additive to earnings was an opportunity we didn’t want to miss. It also gave us the opportunity to demonstrate environmental leadership.
Being the first Fortune 500 company and first Bank to achieve 100% renewable through a single project is a big deal to us. We can claim that because, being smaller than some of the giant tech companies and others who have done this, enabled us to account for our power with one, single project. We’re also the first company worldwide to do this through solar power. We like the fact that we’re proving that you can achieve 100% renewable power in a way that is beneficial to both our bottom line and our planet.
Fifth Third has also joined RE100 and the Business Renewables Center.