A Record Year for Corporate, Utility-Scale Offsite Renewable Energy Commitments

As part of their sustainability commitments, large multinational corporations, universities, and municipalities have been buying voluntary renewable energy tracking instruments from existing projects that are unbundled from the electricity delivered to the grid for years. These procurement efforts remain a simple, low risk part of some sustainability programs. However, many organizations are now looking to make bolder commitments to reduce greenhouse gas emissions and stem the impact of climate change. This need has led to new business models that allow corporate buyers to engage in innovative transaction models to procure renewable energy from utility-scale offsite renewable energy (ORE) projects. 

Corporate Renewable Deals: 2014-2018 YTD

(Source: Rocky Mountain Institute)

According to the Rocky Mountain Institute’s Business Renewables Center, corporate buyers signed 75 deals to procure 6.43 GW of new utility-scale ORE in 2018, up from 31 deals and 2.78 GW in 2017. These deals have now moved past a sustainability commitment to become an integrated part of a comprehensive energy procurement strategy that makes economic sense. Corporate buyers are now becoming new power market electricity offtake partners, and these new renewable energy transaction models are helping corporate buyers meet their needs for energy spend reduction and long-term energy price risk mitigation in a less risky way.

Competition Ramps Up

As the emergence of corporate ORE buyers is occurring, renewable energy project developers and independent power producers (IPPs) are increasingly competing with traditional electricity generation sources in power markets. This competition is due to the decrease in costs and the reduction or elimination of subsidies and incentives for project deployment. These developments are creating uncertainties in long-term income streams that affect the bankability of renewable energy projects. 

Renewable energy project developers and IPPs now view transaction models with creditworthy corporate buyers as an opportunity to mitigate the risks they face when deploying new projects. Guidehouse Insights believes that developers and IPPs that craft flexible contracting mechanisms take advantage of the creditworthy benefits of a corporate buyer. Those that effectively reduce the price risks inherent in long-term power market contracts for the risk-averse corporate buyer will be at a competitive advantage.