Clean Power

Published on November 11th, 2013 | by Rocky Mountain Institute

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Big Business Wants Renewable Energy, But It Ain’t Easy

November 11th, 2013 by  


Originally published on RMI Outlet
by Dan Seif, Bryn Baker

businessmanEmpowered 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.

WHAT’S NEXT?

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.

Images courtesy of Shutterstock.com.






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About the Author

Since 1982, Rocky Mountain Institute has advanced market-based solutions that transform global energy use to create a clean, prosperous and secure future. An independent, nonprofit think-and-do tank, RMI engages with businesses, communities and institutions to accelerate and scale replicable solutions that drive the cost-effective shift from fossil fuels to efficiency and renewables. Please visit http://www.rmi.org for more information.



  • Will E

    Excuses are around.
    have no money, have enough money, have no place, I am too old, I am too young ,do not like it on my roof, EV makes no sound, and so on.
    I have put it together
    1 solar
    2 air to water heat pump
    3 insulated water storage tank
    4 EV
    and save 8000 dollars every year, co2 free, more reliable and comfortable.
    the problem is
    done and working, and nobody believes it even as they see it.

  • For any Business that want’s to employ renewable energy it makes sense to put energy efficiency measures into place first.
    Any Company considering energy efficiency or renewable energy please contact me we can 100% fund your Capital projects form the energy savings we can provide.

  • Andre Coelho

    Companies who are not in the energy business and want renewable energy, don’t need to become energy business companies. Distributed, highly scalable systems of PV panels and solar thermal panels are not hard to find, install and operate. At some locations (usually not in urban centers), small to medium size wind turbine can also help. Lowering grid energy consumption can also come from investing in efficiency (if you need less energy, you don’t have to produce as much). Expertise and know how is on the rise all over the world, so if a company really wants it, it can find the right advice, design and installation of renewables. No more excuses. http://clmtr.lt/cb/zzL0cqR

  • Ontheland

    Of course change is not easy, but when there is a will there is a way. The largest companies should be the leaders as they have resources for training and pushing market and regulatory changes.

  • JamesWimberley

    This reads like a long list of businessmen’s excuses. Companies that really want to go renewable, like WalMart and Ikea, don’t find it that hard.

    “Corporate buyers want to buy clean, renewable power but they can’t buy it directly in many U.S. states.” Solution: unbundle the electricity market in the remaining U.S. states, like Arizona and Georgia, that stick to the regulated monopoly mode. In an unbundled market like Britain, you as customer just ring up Ecotricity or another green supplier and away you go.

    • Bob_Wallace

      Question about Britain’s market. If the Hinkley Point reactor gets built and the owners are paid 16c/kWh will this be charged back to the price of electricity?

      If so, and it’s enough to raise the cost of electricity for that vendor, can’t people simply move to another supplier? And doesn’t that put the company that has the contractor with EDF/China in danger of losing their customers?

      Or would the British taxpayer be on the hook?

      Know anything about how it would work?

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