A newly released report from the Wind Energy Foundation (WEF) calls upon transmission planners to take into account the significant renewable energy demand of large non-utility customers, especially from Fortune 500 companies. That’s because big companies are increasingly signing deals to buy wind and solar power, and their large and growing demand for transmission upgrades may exceed existing plans.
According to the WEF report, Transmission Upgrades and Expansion: Keys to Meeting Large Customer Demand for Renewable Energy, a coalition of more than 100 corporate entities set a goal of purchasing 60 gigawatts (GW) of renewable energy by the year 2025, equal to 110 conventional power plants and enough electricity to power nearly 50 million homes. The report estimates that, considering the 9 GW of renewable energy already procured by the Renewable Energy Buyers Alliance (REBA) since 2013, there are at least 51 GW remaining in this goal.
The report questions whether current transmission plans can accommodate the increase in demand.
Investment in transmission infrastructure is essential, the report’s authors say, to support not only significant additions of renewable generation to meet corporate and other demand but also to support the longer-term electrification of transport, heating, and cooling. Four key findings emerged in the Wind Energy Foundation report:
- Renewable energy commitments from large corporations are growing rapidly and will lead to significant renewable energy procurement through 2025.
- Most of the best renewable energy resources are in a 15-state mid-America region, while load growth is highest outside that region.
- Expanded and upgraded transmission is needed to unlock new low-cost renewable energy for corporate and other consumers.
- Transmission planners should account for corporate demand to procure renewable energy.
Why Are Corporations Becoming More Interested In Renewable Energy?
Companies are investing in renewable energy primarily because it is increasingly the lowest cost option, as wind and solar are often the cheapest sources of new generation. Today’s wind costs are one-third what they were in 2009, falling 67 percent, from $140/MWh to a range of $30-60/ MWh, in just 8 years.
Companies are also motivated to invest in renewable energy to:
- stabilize energy pricing and reduce risks of long-term price volatility;
- address demand from investors and customers;
- reduce risks of climate change to operations and supply chains;
- minimize carbon emissions and other air pollutants from their energy usage;
- demonstrate corporate leadership, innovation, competitive first-mover advantage; and,
- keep up with growing trends from competitors and peers.
Corporate commitments to procure renewable energy are growing rapidly and are projected to continue to do so. REBA collaborates with RE100, a group of corporate purchasers committed to source 100% of their power from electricity. RE100 includes notable members such as Anheuser-Busch InBev, BMW, General Motors (GM), Johnson & Johnson, and Procter & Gamble (P&G). Of a recent survey of 153 large corporate buyers (public and private), 128 (or 84%) are actively pursuing or considering purchasing renewable energy over the next 5 to 10 years.
What Does It Take To Build A Transmission Line System?
An opportunity exists to meet large customer demand for renewable energy through transmission upgrades and expansion. Transmission lines are essential for moving electricity from where it is produced to where it is consumed. The US has more than 200,000 miles of high-voltage transmission lines, which facilitate electricity commerce and provide consumers with lower cost electricity. The transmission network then connects to the smaller distribution power lines — the equivalent of smaller local roads — to bring that electricity into homes and businesses.
Building a transmission line can require the involvement of a number of several different parties, including state, regional and federal authorities, planning coordinators, utilities, and transmission developers. The report argues that a fully integrated national transmission grid is technically feasible. It would require joining the three existing transmission interconnections — Eastern, Western, and ERCOT — either by strengthened direct-current lines or by synchronizing their alternating currents and providing high-voltage interconnections between major systems.
The conservative transmission scenario would meet only 42% of corporate renewable energy demand in the high-demand scenario and 78% in the low-demand scenario. The aggressive transmission scenario would meet 70% of high scenario for corporate renewable energy demand and over 100% in the case of low corporate renewable energy demand. The Wind Energy Foundation report asserts that transmission planners should ensure that future transmission build is able to accommodate a high corporate procurement scenario.
What’s The Holdup For The Transmission Upgrades & Expansion?
A key barrier to bringing more renewable energy online is the absence of transmission planning across Regional Transmission Organizations (RTOs) and other regional planning authorities. The four target area/ key RTOs and Independent System Operators (ISOs) are the Electric Reliability Council of Texas (ERCOT), the Midcontinent Independent System Operator (MISO), the PJM Interconnection (PJM), and the Southwest Power Pool (SPP). These four RTOs are of particular interest because they span geographic regions with high onshore wind resources.
Also, the central US region contains most of the technical potential for wind and solar development, but this area has low projected load growth. This region accounts for 88% of the country’s wind technical potential and 56% of the country’s utility-scale solar photovoltaic technical potential yet is home to only 30% of projected 2050 electricity demand. Investment in transmission infrastructure is essential to support not only significant additions of renewable generation to meet corporate and other demand but also for the longer term electrification of transport, heating, and cooling.
Key Recommendations From The Wind Energy Foundation
Corporate buyers and other large institutional customers should:
- encourage transmission planners and state Public Service Commissions to increase access to affordable, renewable energy by approving upgrades and expansion to transmission lines;
- participate in regional and inter-regional transmission planning conversations to ensure future transmission infrastructure meets customer demand for renewable energy; and,
- urge FERC to continue work to improve the interregional planning processes consistent with Order 1000.
Operators of RTOs and others involved in transmission planning should:
- incorporate voluntary, large customer demand in transmission planning; and,
- strengthen planning across RTOs and other regional planning authorities to ensure efficient interregional transmission.
How Do Power Purchase Agreements Work?
Since 2013, corporate buyers have procured 9 GW of renewable energy through power purchase agreements (PPAs).
A power purchase agreement (PPA) is a contract between two parties, one which generates electricity (the seller) and one which is looking to purchase electricity (the buyer). The PPA defines the commercial terms for the sale of electricity between the two parties, such as the schedule for delivery of electricity and payment terms. Corporate energy buyers may choose either a physical or virtual PPA based on a combination of factors, including:
- access to retail electricity choice; ability to act as wholesale energy customers;
- relative location of energy demand to economic wind projects;
- timing of retail energy procurement contracts; and,
- expected lifetime of facilities with energy demand.
A mix of both PPAs and utility products will likely be necessary to achieve the ambitious 60 GW goal. Corporations who are leading the way in non-utility renewable energy purchases include Amazon, GM, Google, Microsoft, Walmart, Kimberly Clark, and Anheuser Busch InBev.
Upgrading and expanding the existing transmission network would also relieve congestion problems and could lower costs for non-PPA consumers.
With the energy demand from large corporations growing rapidly, many are choosing renewable power to meet their existing needs as well as supply new demand. These companies have a variety of reasons for increasing their demand for renewable energy, such as lower costs, price risk reductions, and corporate environmental initiatives. Corporate desire for renewable energy sources is good news, because renewable energy is more affordable than ever, but customers’ access to this affordable energy is constrained by inadequate transmission planning.
To remove the barrier to transmission planning across RTOs, facilitating interregional planning on a large scale is required. The transmission line enhancement approach described in “Transmission Upgrades and Expansion: Keys to Meeting Large Customer Demand for Renewable Energy” has been endorsed by groups such as Americans for a Clean Energy Grid — a diverse coalition of stakeholders working to enhance effective regional transmission development.
About the Wind Energy Foundation
The Wind Energy Foundation is a nonprofit organization dedicated to raising public awareness about the importance of wind and other renewable energy sources through communication, research, and education. This report was produced as part of the multi-sector “A Renewable America” campaign, focuses primarily on the Eastern Interconnection and ERCOT, and is based on reviews of online literature on transmission, as well as a series of interviews with companies, RTOs, and ISOs.