By Letha Tawney
From the January/February 2015 issue
The dramatically improved business case for renewable energy is creating new opportunities for facility executives to control energy costs now and into the future. But buying this energy needs to be far simpler in many markets. In response, 19 iconic companies (and counting) are asking their utilities and the electricity marketplace to create the renewable energy products they need to meet their sustainability and financial performance goals. Supported by World Wildlife Fund and World Resources Institute, these companies released the Corporate Renewable Energy Buyers’ Principles in 2014 to make it clear how they would like to buy renewable energy.
The cost of renewable energy has fallen dramatically in the last few years. Behind-the-meter self-generation is competing with retail electricity rates in more markets. Installed prices for both residential and commercial solar PV systems declined in 2013 by 12% to 15%, depending on system size. Data from the first six months of 2014 indicate these prices have continued to decline, with installed prices decreasing an additional 20¢ to 50¢ p/W in several larger state markets (source: National Renewable Energy Laboratory and U.S. Department of Energy). Large-scale renewable energy, delivered over the grid by a utility, has also fallen dramatically. For example, according to U.S. Department of Energy data, the best wind power purchase agreements were hovering around $22/MWh in 2013 in the interior U.S.
Falling costs are only part of the story. “Renewable energy can provide long-term price certainty given the absence of fossil fuels and related price volatility, combustion by-products, and costs tied to emission reduction requirements,” says Vince Van Son, Facebook’s data center energy manager.
With new limits on pollutants and waste in both the air and water, beginning in 2015, it is expected that more coal power plants will be retired. In fact, according to data from the U.S. Energy Information Administration, total coal generating capacity is projected to decline from 310 GW in 2012 to 262 GW in 2040. Renewable energy is becoming a central strategy for controlling energy costs into the future. The predictable, fixed price nature of this energy hedges facilities against volatile natural gas prices and the impacts of issues like the potentially $10 billion coal ash pond cleanup Duke Energy faces in North Carolina.
The first step for those trying to take advantage of this business case is behind-the-meter renewable energy. Access to behind-the-meter systems has improved with the rise of the third-party model, epitomized by Solar City, a solar power provider based in the western U.S., and its competitors. In 23 states, companies can add solar PV to their facilities with no upfront capital costs through a contract with a third-party provider. In states like California, Arizona, and Colorado, up to 81% of all installed distributed generation systems were third-party owned in the first quarter of 2014, according to the Solar Energy Industries Association.
Wal-Mart’s David Ozment, director of energy, underscored the importance of projects like these, noting Wal-Mart’s size requires having a greater choice in energy procurement options so as to meet sustainability goals in the most cost-effective way. “At the end of 2013, we had more than 335 renewable energy projects in operations or under development across our global portfolio,” he says. “In the U.S. alone, we now have over 250 on-site solar projects.”
But even in the best cases of highly energy efficient facilities, these systems often meet only 30% of a big box retailer’s demand, and far less for other facilities. And they are not an option at all for many that lease their facilities or are in states that limit behind-the-meter installations by third parties. Ozment continues, “… we have a large scale utility size wind turbine at a distribution center, we’re buying the energy from a landfill gas project, and in Mexico we’re buying the output from utility scale wind farms to serve stores in that country.”
Seeing the opportunity and the barriers to seizing it, 19 companies representing more than 10 million MWh of combined renewable energy demand by 2020 signed the Corporate Renewable Energy Buyers’ Principles. The Principles outline six criteria that would simplify access to renewable energy:
- Greater choice in procurement options
- More access to cost competitive options
- Longer- and variable-term contracts
- Access to new projects that reduce emissions beyond business as usual
- Streamlined third-party financing
- Increased purchasing options with utilities
The companies signed these principles to state their commitment to using renewable power as well as to highlight the challenges they face in procuring it. These large, global brands are invested in fostering a dialogue with utilities, regulators, and other stakeholders.
“We are standing with other companies to encourage utilities and governments to help make this cleaner-air future a reality,” Gayle Schueller, vice president of global sustainability at 3M said of the Buyers’ Principles. “Cost competitiveness and broad geographic availability of renewable energy are two of the biggest issues limiting mainstream adoption, and these principles help address these obstacles.”
Going forward, Kevin Rabinovitch, global director of sustainability at Mars Inc. says, “…[what] we’re trying to do here is change from disconnected background noise and message to a very clear call for trying to move forward.”
And the effort is paying off. The signatories are making headway collaborating with their utilities to access renewable energy.
In November 2014, Facebook’s newest data center in Altoona, IA, came online. Almost simultaneously, 60 miles away in the town of Wellsburg, IA, a new wind project, owned and managed by the local utility, began to deliver 140 MW of renewable energy into the grid.
In Washington state, outdoor gear retailer REI has been collaborating with Puget Sound Energy to bring an urban waste fueled biogas facility online that adds new renewable energy to the local grid and locks in a fixed power price through a long-term commitment.
The falling cost of renewable energy and the fixed-price structure of the electricity it provides are creating a compelling business case for companies to increase their use of renewable energy. Increasingly, facility executives will be able to use this to integrate their financial and sustainability goals. While their options are still limited, companies are increasingly working with their utilities to change that and access the full value renewable energy can deliver.
Tawney is the acting director of the Charge Initiative, the signature renewable energy initiative of World Resources Institute, in the Energy Program. She works on the strategy to transform electricity markets to power development with affordable, sustainable electricity.