RMI Guide Details Risk Mitigation for Corporate Renewables Purchasers

by | Jan 15, 2019

risk mitigation

(Photo: The Alabama Solar A project, which provides power to Walmart through a long-term contract signed in early 2018. Credit: Swinerton Renewable Energy)

In the United States, corporate renewable procurement has quickly gone from a niche part of the electricity system to a substantial part of it. Despite that rapid expansion, however, Rocky Mountain Institute’s research shows that risk mitigation solutions haven’t kept pace.

A new RMI report published today shows that the issue of buyer risk has been raised with increasing frequency over the last few years. Rather than a one-size-fits-all approach to risk mitigation, the guide recommends that the market adopt a “many-size-for-all” one.

Called A Corporate Purchaser’s Guide to Risk Mitigation, the report outlines key strategies to manage risk in corporate renewables procurement. Co-authored by Rachit Kansal and Tim Singer, it explores five specific risks that buyers tend to find unfamiliar: price, shape, basis, volume, and operational risk.

Energy Manager Today caught up with the report’s co-author Rachit Kansal, an associate at Rocky Mountain Institute’s Business Renewables Center and electricity practice, to learn more.

What prompted the new report?

The report was prompted by a combination of demand from members and BRC’s own understanding of the corporate renewable market. From numerous member conversations and risk-focused workshops, the BRC observed a sharp increase in popularity of the risk mitigation dialogue over the last year. Corporate buyers were and are placing greater importance on risk mitigation, including asking for a better understanding of mitigation options.

This increasing market demand, coupled with BRC’s belief that a broader adoption of risk mitigation solutions is needed for the market’s long-term health, has led to the development of this report.

How did you select the five buyer risks to explore?

The five risks were chosen from BRC’s extensive experience hosting buyer training workshops and through interactions with over 100-plus buyer members. These five risks have consistently proven to be unfamiliar to new buyers, while being highly relevant to renewable procurement.

Why do these risks tend to be unfamiliar to buyers, and what’s at stake if they’re not addressed?

Four of the five risks — price, basis, shape, and volume — are fairly specific to electricity markets. They are influenced by both the volatility of wholesale electricity prices and the variability of renewable resource availability, and are less familiar to corporate buyers who often operate in a variety of industries. Operational risk stems from the supply-side — the risk of renewable technology underperforming or failing — and is also unfamiliar to many corporates.

What did you discover about risk mitigation solutions?

Many solutions are quickly emerging in the market, and they all tackle one or more of the five risks highlighted in the report. Corporate buyers can provide a strong demand signal for a more robust and accessible set of solutions. There is no silver bullet, and buyers must determine what best suits their needs, constraints, and priorities.

What are the key takeaways for navigating solutions?

Three key takeaways for a corporate buyer to navigate these risk mitigation solutions:

  • The buyer must determine why it is procuring renewable energy — its goals, its priorities, and what impact it is looking to demonstrate
  • The buyer must determine its constraints and available internal capacity
  • The buyer must determine what solution is commercially available in its market

Where do you see corporate renewable energy procurement headed in the future?

Corporate renewable procurement is set to continue growing in volume this year, building on a landmark 2018. A broader set of corporate buyers is likely to buy renewable energy, and those buyers are more likely to be international this year, compared to last year.

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