Empowered by aggressive climate and energy targets, companies more than ever before are driving the transition to renewable energy—but that effort is not without hurdles.
WWF’s Power Forward report, for example, showed that 60 percent of Fortune 100 and Global 100 companies have climate goals. To meet these targets, renewables are high on the hit list, but companies are finding buying and investing in renewable energy particularly challenging, even when they’re putting their shoulders into it. Witness Google’s white paper calling for new approaches to expand renewable electricity procurement options.
To address these challenges, WWF and RMI held a Corporate Renewable Energy Buyer’s Day. Companies representing more than $1 trillion in annual revenue discussed and prioritized how to best execute against these challenges. Here’s what we found:
Challenges of getting to the finish line
We know companies face a variety of barriers that are slowing progress, including:
1) internal challenges, including knowledge and management support; 2) market challenges that lead to high transaction costs; and 3) limits on what they can do and how they can do it caused by laws, utility regulators, utility practices, and accounting standards.
Ready, set, internal high jump!
As companies try to source and execute projects to meet their goals, even the largest companies struggle to learn about the complex deal structures and financial instruments they need to buy renewables. Confusing financial accounting and legal structures put a burden on staff and management and often require expensive outside expertise. Renewable energy developers, suppliers, and buyers need to work together to make information and resources easier to access and understand, so company management understands the benefits of renewables investments.
Immature market structures raise the transaction costs
No matter how much renewable energy expertise is available within a company, current market structures are bound to prove challenging.
- Term: Many companies are limited in their ability to sign long-term power purchase agreements (PPAs), the industry standard. Shorter-term or transferable contracts like the subscription trading offered to residences and small businesses would offer more flexibility.
- Standardized Contracts: Even when companies are amenable to more typical PPA or investment terms, contracts aren’t standardized, which confuses the process. Standardized contracts would go a long way in preventing businesses from dealing with apples, oranges, and pears.
- Asymmetric Information: Companies also find it challenging to even find potential projects because of the lack of transparency around available project opportunities.
- Complexity of Renewable Microgrids: Many companies want an “islandable,” reliable energy supply, but balancing variable renewables can be complicated. Integrated deals that easily bundle renewables with other balancing technologies can help companies cover their full energy demand.
Corporate buyers don’t want to be in the energy business
Corporate buyers want to buy clean, renewable power but they can’t buy it directly in many U.S. states. It’s like going to buy a new car, but finding all the cars are the same model and only come in black. Corporate buyers generally would rather buy green power from a supplier like a normal procurement decision than meet their goals project by project. Lack of simple procurement options that meet their needs are driving them to go around utilities.
All this would be a lot easier if utilities—those in the business of procuring and delivering energy—were able to sell the renewable energy product their customers are looking for. As the growing number and scale of corporate goals demonstrates, there’s a market here; utilities have a business opportunity ripe for the picking.
There is a day coming soon when the vast majority of U.S. businesses are supplied by renewable energy. Companies have the power to make large investment and procurement decisions that can move and shape energy markets.
Many already have. They see the business value renewable energy offers. However, the common challenges identified at the Buyer’s Day workshop hinder their progress. A clean, prosperous, and secure future comes closer when the choice to go renewable is the easiest path. WWF and RMI will use ideas from the Buyer’s Day to drive several solutions that make that desired future arrive even sooner.
Please contact corpREbuyersday@wwfus.org and/or corpREbuyersday@rmi.org to learn more about WWF’s and RMI’s respective ongoing efforts.
Co-author Bryn Baker is the manager of renewable energy at World Wildlife Fund.
Images courtesy of Shutterstock.com.