Public officials in more than 20 states have been kicking up a regular haboob over the evils of “woke capital,” by which they mean to thwart clean energy investment. Meanwhile, Google has just sneaked right up and pulled the rug out from under them. In a new partnership with the startup LevelTen Energy, Google aims to kick wind and solar development into high gear by cutting 80% off the time it takes to execute power purchase agreements.
Renewable Energy: So Close, And Yet So Far
Power purchase agreements have emerged as an essential tool for connecting renewable energy seekers with clean kilowatts.
The basic idea is to relieve buyers from the burden of developing their own renewable energy projects. Instead, they agree to offtake the power from wind farms and solar arrays. That includes utilities, which can leverage the agreements to attract or retain customers before a project goes online. In return, developers avoid the risk of taking on a project without first locking in buyers.
That’s all well and good, but the devil is in the details. Buyers and sellers must still initiate and negotiate contracts, and that takes time. It also takes resources. The buyer in search of clean power typically issues a Request for Proposals and dedicates staff or hires a negotiator to see the contract through.
Smoothing The Path To Renewable Energy
Renewable energy buyers with multiple locations can cut costs and avoid reinventing the entire wheel with each purchase. The US Forest Service took that approach back in 2015, when it hooked up with the Department of Energy, the Environmental Protection Agency and the General Services Administration to establish a standard inter-agency power purchase process.
The Department of Defense has also leveraged multiplicity to help streamline its power purchase activity.
In the private sector, General Motors is a good example of the power of power purchase agreements. In 2016 the company set a goal of 100% renewable energy for its U.S. facilities by 2050, with the help of power purchase agreements. In 2021 GM reset the clock to 2025. Just one year later, in October of 2022, the company announced that it put the finishing touches on agreements that meet the 100% goal.
As for smaller businesses, that’s a good question. They can benefit indirectly, when a buyer funnels their power purchase agreement into the grid. The buyer gets to claim credit for reducing greenhouse gas emissions, even if most — or none — of its operations directly benefit.
Last fall, for example, McDonald’s announced a virtual power purchase agreement with EDF Renewables for electricity from the new 332 megawatt (DC) Apollo Solar Project in Texas, which is on track to commence operating in 2025. According to McDonald’s, that’s the equivalent of the energy used by 1,200 of its retail stores.
The LevelTen Solution
Earlier this year Bloomberg ran the numbers on growth in the power purchase market and observed that “Such contracts are comparatively easy for buyers to sign and allow them to hedge against power price spikes.”
That’s easier said than done for smaller companies, but help is on the way. CleanTechnica took note of LevelTen Energy back in 2018, when the company explained its aggregation system for making power purchase agreements more accessible to more renewable energy buyers.
The basic idea is to build a portfolio or sort of “mutual fund” of renewable energy projects, which can be tailored to the individual buyer.
“By aggregating both buyers and sellers, our technology-enabled marketplace offers smaller C&I [commercial and industrial] customers access to the same projects and terms afforded to the world’s largest energy buyers,” LevelTen explains. “With access to a portfolio of the market’s best projects, C&I customers can painlessly meet sustainability objectives and stabilize energy costs, making cumbersome RFP [request for proposals] processes a thing of the past.”
In 2019, LevelTen upped the game on its buyer-seller Dynamic Matching Engine model, in a customized, 146-megawatt deal with Starbucks. LevelTen described the agreement as groundbreaking, partly because it provides Starbucks with partial offtake from three different renewable energy projects with three different developers, spread among three grid markets in the U.S. (SPP, ERCOT, and PJM for those of you keeping score at home). LevelTen also notes that the three agreements were almost identical and were executed almost simultaneously, in support of its portfolio-not-piecemeal model.
In addition, the customized agreement was tailored to Starbucks’ particular needs in particular locations, rather than locking the company into predetermined volumes.
Google Takes Renewable Energy To The Next Level
LevelTen had a portfolio of more than 1200 wind and solar projects involving 150 developers and almost 110 gigawatts in capacity back in 2018. In 2020 they launched LevelTen Marketplace 4.0, described as “the world’s most complete collection of transaction-ready PPA offers, with more than 3,800 offers from over 1,100 projects under development, spanning 21 countries across North America and Europe.”
In 2021, the company launched something called the Asset Marketplace, aimed at speeding up asset sale transactions. The Marketplace facilitates the buying and selling of clean energy projects themselves, including the increasingly important market for distributed energy resources. In one recent example, the company Scale Microgrids acquired a collection of 13 ground-mounted and rooftop solar projects totaling 8 megawatts, spread over 23 sites in New Jersey, Colorado, North Carolina, Oregon, Pennsylvania, Delaware, and California.
Against this backdrop, on March 15th, Google announced that it has been piloting a new process aimed at reducing the time to negotiate and execute a power purchase agreement by 80%.
Google notes that renewable energy buyers are still re-inventing the wheel with every power purchase agreement. The Request for Proposals part of the process is especially cumbersome.
“Even before buyers and sellers enter into negotiations, traditional RFPs create an information imbalance between parties. Uncertainty and unpredictability create delicate conditions that can increase the complexity of negotiations between parties down the line,” Google explains.
“RFP conversations can drag on for anywhere from ten months to more than a year, increasing the cost for both buyers and sellers,” Google adds.
The pilot project involves tweaking LevelTen’s Energy Marketplace to generate a new kind of RFP, in which the price is determined up front based on the final details of the contract.
The project also involves building more transparency into power purchase agreements. The risks between buyer and seller are pre-balanced rather than forecast, cutting the negotiation phase down to the bone.
“These changes significantly shorten the start-to-finish time of executing clean energy PPAs. Whereas traditional deals can take more than a year, this innovative approach has already enabled contracting for new ‘additional’ clean energy in just two months,” Google explains.
UPDATE from LevelTen: “For more context, the LevelTen Energy Marketplace has continued to grow since the launch of the Marketplace 4.0 in 2020. LevelTen’s Energy Marketplace now features more than 1,800 projects from over 800 global developers, spanning 25 countries across North America and Europe. In addition to working directly with some of the largest clean energy buyers in the world, LevelTen also partners with over 50 energy advisors and electricity retailers, who use the platform to procure clean energy on behalf of their clients.”
It Depends On What You Mean By “Additional”
That word “additional” is not a throwaway. Specifically, that refers to Google’s “additionality” criteria.
“This means we’re not buying power from existing wind and solar farms but instead are making long-term purchase commitments that result in the development of new projects,” Google CEO Sundar Pichai explains.
That sure sounds like a new wave of wind and solar projects is on the way. LevelTen and Google are planning to wrap up the pilot phase and roll the new system out to buyers and sellers later this year, so stay tuned for more on that.
Meanwhile, expect more caterwauling about “woke” this and “woke” that from Republican office holders, who are attempting to jam the flow of capital into clean power projects.
Good luck with that.
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Image: Google and LevelTen score check on clean power foes (chess set on Google campus courtesy of Google).
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