Corporate Renewable Procurement Innovations Open the Market to New Players

The market for corporate renewable procurement is ever evolving, as corporations continually improve their procurement efforts to deliver impacts that better align with their environmental, social, and governance goals. In the past year, several large corporations announced initiatives that are opening the renewable procurement market to previously excluded stakeholders. Some support the development of small distributed renewable assets in underserved communities, while others aim to open the power purchase agreement (PPA) market to small and medium sized businesses (SMBs). The sections below highlight these initiatives and what they represent for the broader corporate renewable procurement market.

Developing Distributed Renewables in Underserved Communities

Salesforce’s Purchase of D-RECs

Distributed renewable energy certificates (D-RECs) are a new form of energy attribute certificate that aggregates data from small, distributed renewable energy projects into a 1 lMWh D-REC. D-RECs were created as a mechanism to allow smaller, distributed generation assets to participate in the corporate procurement market, with an emphasis on assets located in energy-poor communities. The ultimate goal is to leverage capital from corporate procurement to fund renewable projects in the areas that need them the most.

In February 2023, Salesforce announced a contract with Powertrust to procure 280,000 MWh of D-RECs from renewable projects in Brazil, India, Southeast Asia, and Sub-Saharan Africa. The projects support the development of renewable energy in areas where it will have meaningful social and environmental impacts. They include solar-powered microgrids in rural communities that currently lack access to electricity, and a solar plus storage installation on a hospital to improve energy reliability. The contract highlights an emerging trend in the corporate renewable procurement market in which corporations are increasingly including social justice and equity into their procurement strategies and looking to procure energy from communities outside the US and Europe.

Google and EDPR NA’s Clean Energy Financial Benefit Sharing Program

In April 2023, Google and EDP Renewables North America (EDPR NA) announced their Clean Energy Financial Benefit Sharing Program, which will support over 80 distributed solar projects. The program includes a heavy focus on social justice, committing to install at least one-third of the projects in low and moderate income communities. It also commits to share at least 10% of the revenue from the projects with high energy-burden households in the areas where the projects are built.

This program demonstrates another innovative approach for incorporating social equity and justice into corporate renewable procurement efforts. Traditionally, large corporations like Google have pursued contracts for larger amounts of capacity (100+ MW), which ultimately concentrates renewable development in fewer areas. This newer approach of pursuing many smaller contracts allows corporations to spread the benefits of renewable energy generation to more communities, especially those that have historically been underserved.

These two initiatives mark a shift in the market toward smaller, distributed renewable generation in order to have more equitable outcomes from renewable procurement. More organizations are likely to follow suit, procuring energy from smaller, distributed projects in areas that offer significant impact.

Opening the PPA Market to SMBs

Walmart and Schneider Electric’s Gigaton PPA Program

In 2020, Walmart and Schneider Electric paired up to offer the Gigaton PPA Program, which gives Walmart suppliers the opportunity to join aggregated PPAs. These aggregations allow multiple companies to collectively negotiate PPAs, helping smaller companies that may otherwise struggle to win competitive contracts on their own. In 2022, the program announced its first aggregated PPA, in which Amy’s Kitchen, Great Lakes Cheese, Levi Strauss & Co., the J.M. Smucker Co., and Valvoline Inc. came together to procure 250,000 MWh of annual energy from Ørsted’s Sunflower Wind Farm in Kansas.

While this is one of the first major aggregated PPAs executed in the market, it marks the opening of the PPA market to a broader set of businesses that were previously unable to participate. SMBs often have a hard time winning utility-scale projects for a variety of reasons, including needing contracts for relatively small capacities, appearing riskier to financiers for contracts of 5 or more years, and having fewer staff with procurement expertise and skills. Aggregated PPAs offer these companies the opportunity to become more competitive by combining their demand and financial credibility, especially when major corporations and advisory services like Walmart and Schneider help execute the deal.

PepsiCo and Schneider Electric’s pep+ REnew Program

In 2022, PepsiCo and Schneider Electric announced the pep+ REnew program to help PepsiCo’s supply chain partners procure renewable energy. The program will educate participating companies about renewable energy procurement and provide them the opportunity to join aggregated PPAs. The program is the first of its kind in the food and beverage industry and will help PepsiCo achieve its goal of net-zero emissions across the value chain by 2040.

Both of these initiatives demonstrate the role that large corporations can play in opening the market to SMBs. These types of programs, and aggregated PPAs in general, will likely become more common as corporations increasingly focus on reducing Scope 3 emissions (i.e., any indirect emissions from upstream and downstream activities).

Overall, these developments highlight how a little bit of innovation can go a long way in ensuring the massive amount of capital spent on corporate renewable procurement is spread widely and equitably. To learn more about this dynamic market, check out Guidehouse Insights’ latest Corporate Renewable Procurement Strategies report.