Five companies including Bloomberg, Gap, Salesforce, software vendor Workday and media and automotive company Cox Enterprises, recently announced a jointly-negotiated solar agreement for 42.5 megawatts of renewables, a move the companies say is a “blueprint for renewable energy aggregation.”
While aggregation deals are not new — Apple joined with Akamai, Swiss Re and Etsy in 2018 on 290 megawatts, for instance — the agreement announced this month is unique because of the small capacity signed for by each offtaker. Instead of one anchor tenant accounting for a majority of the agreement and smaller companies squeezing into the deal, all of the offtakers secured between 5 and 10 megawatts.
After a record year for corporate offtake agreements in 2018, watchers of the space say the deal is an encouraging sign that unique arrangements are opening the market to more and more players.
“We’ve seen smaller and smaller deals being announced,” said Roberto Zanchi, senior associate at Rocky Mountain Institute’s Business Renewables Center. “That to me really represents deals becoming possible for a different kind of renewable energy buyer.”
Zanchi said the new deal, which is part of a larger 100-megawatt project in North Carolina, “could really unlock a new model” in corporate renewables procurement.
Because due diligence and project logistics generally cost the same no matter the size of the project, economies of scale help make projects cheaper. Big buyers like tech companies have the balance sheets and electricity demand for those large deals. But Zanchi said expecting an anchor tenant to tack smaller companies onto a project, like with the Apple deal, could be unsustainable.
“There are only so many big buyers out there that might be willing to join a group of four or five and help those others out,” said Zanchi. “I would hope this [model] is more replicable for other buyers to potentially use.”
The five companies organized the deal with help from LevelTen Energy, a company that aggregates buyers and sellers and connects them with its project marketplace. Bryce Smith, the company’s founder and CEO, said he felt the “old brokerage model was broken” because it kept smaller buyers from entering the market.
“There are a lot of corporate buyers on the sidelines waiting to participate,” Smith said. “But to date there hasn’t been a way for those companies to cost-effectively buy PPAs because they want 5 megawatts, not 500. That’s really what’s most exciting about the model — you can allow much smaller purchases, you could aggregate those into something meaningful, where the economics are on par with the economics of much larger purchases.”
Smith said the price for a 5- or 10-megawatt project is an order of magnitude more expensive than a power purchase agreement for 50 or 100 megawatts.
Michael Barry, Bloomberg’s head of sustainable business operations, said “it was in [Bloomberg’s] business interest” to sign onto the deal. Barry noted that it’s very difficult to contract for small capacities, but Bloomberg has sustainability commitments to meet. The larger project, with companies uniting as an anchor tenant, helped the project pencil.
Kevin Sok, senior manager of environmental responsibility at Cox Enterprises, said working together with the help of RMI’s BRC and LevelTen can also help with the administrative aspects of signing a deal. Though Cox has signed other onsite and offsite solar deals, he said it can be difficult for a small company to work on contracts without a dedicated team.
“The biggest challenge is having that internal expertise to help you understand the mechanics of the energy market,” he said.
Statistics show that corporate interest in renewables is growing overall. RMI’s Business Renewables Center logged over 6.4 gigawatts of deals signed in 2018, a doubling of its previous record.
Consortiums like the Renewable Energy Buyers Alliance, which is supported by RMI as well as the World Resources Institute, World Wildlife Fund and Business for Social Responsibility, are also working to make more resources available to corporates.
Smith said those types of initiatives are important to make sure companies of all sizes can access the market.
“We are all so fortunate for the efforts that the Microsofts of the world have made and the paths they have cleared for other buyers,” said Smith. “But if we can’t create structures that allow the easy participation from that long tail of C&I buyers, we miss a real opportunity.”
Source: Greentech Media
