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Market Insight

A slow beginning to 2016 - and a call for action

The first two quarters of 2016 have been disappointing. By the end of Q2 2014, 705 MW of corporate renewables had been contracted and, by the end of Q2 2015, 892 MW had been contracted (see BRC’s deal chart by quarter). Today, even with the latest deals announced from Digital Realty, Walmart and Google, we are still at only 586 MW announced this year. To meet our collective goal of 4 GW a year, we would need to see another 3.4 GW signed in Q3 and Q4 of this year. While we have been hearing that many deals are in the works or are being closed but not publicly announced yet, we would like to ensure the community is not losing momentum. Two simple actions you can take:
  • Send to brc@rmi.org, using the title: ”Recruitment,” contact information of new prospective corporate members
  • Send to brc@rmi.org, using the title: “Obstacles,” any insight on what prevents new deals from being closed and what we could do about these obstacles as a community committed to delivering 4 GW a year

An interesting new deal structure

The latest deal between Amazon Web Services (AWS) and its retail electric utility, Dominion Virginia Power (DVP), demonstrates how corporates can both sign wholesale PPAs and collaborate with their retail utilities in order to add renewable capacity to the grid while managing their exposure to market price risk. Before the deal, AWS had signed PPAs enabling four utility-scale renewable energy projects to be built in the Eastern U.S. Now, through a new agreement with DVP, approved by regulators, the energy charge on AWS’s retail bill floats based on wholesale electricity prices, in the same way that AWS’s revenue on the PPA does. This means that when wholesale prices rise, AWS earns more on the PPA but also pays a higher retail rate. Conversely, when wholesale prices fall, AWS earns less on the PPA but also pays less on its retail bill.

For more information regarding the Amazon Dominion deal, click here.

Market Insight Brief teaser

The Great Plains have the best overall wind resource in the nation, and two thirds of corporate wind PPAs signed to date have happened in a plains state. The majority of deals in the plains have occurred in Texas, which accounted for 83% of plains wind PPAs signed through 2014. However, since the beginning of 2015, more deals are getting signed further north, in Oklahoma and Kansas, with Texas’ share of plains wind PPAs dropping to 60%. Our upcoming insight brief highlights some of the key drivers to this trend, and what it means for corporations analyzing PPAs in the region.

Additionality

The notion of additionality is at the very heart of the BRC community’s activities. Corporate buyers sign renewable deals—as opposed to buying RECs on a yearly basis—to be able to make strong additionality claims. Our collective goal—of 60 GW by 2030—is fundamentally about additionality. Yet, additionality is ill defined, and there are good reasons why that is the case.
  • Most of us would agree that if a PPA contracts 100 MW out of a 100 MW project and runs over a period of 20 years, the PPA would be additional.
  • Most of us would also agree that if the PPA were for 1 kW for a 100 MW project, or 1 hour of duration, the action of signing that PPA would not be additional.
That raises the question: for the continuum of values in between, can we say something is additional or not?

Another logical inconsistency with the notion of additionality is the fact that multiple parties can claim additionality for the same deal. A corporate buyer may claim additionality for having signed a PPA; another corporate buyer for having provided tax equity to the same project. Both are right in their claim that without them, the project would not have been built. But only one project got built, not two.

Another issue is related to risk warehousing. A market maker may sign a 12-year PPA with a 200 MW wind farm, making it bankable, and resell its position in smaller chunks to corporate offtakers. The PPA signed by the market maker is clearly additional. But the market maker is usually not interested in keeping additionality claims. It would like to transfer “additionality” to the corporate offtakers it is reselling its position to. How can it achieve that? In particular, if the market maker resells its position with 6-year contracts, are the first 6 years additional? People will probably be split on that question. The second 6 years? Most people would probably say “no.”

There is general agreement that we should find a definition of additionality that provides incentives to all market participants to put more steel in the ground. How do we move forward? We propose to start with two questions:
  1. Do we want a binary definition of additionality (“true” or “false”) or a continuum of values between two extremes (“fifty shades of green”)?
  2. Do we want a robust mathematical solution to the problem, or a more interpretative approach, based on high-level principles and jurisprudence?
If you have strong view on this topic in general and on those two questions in particular, send us an email at brc@rmi.org with the title: “Additionality.”

Celebrating Recent Deals

Congratulations to our members (in bold) on their most recent deals.
  • Google’s 200 MW wind PPA in Kansas with Tradewind Energy and Enel Green Power North America
  • Walmart’s 72 MW wind PPA in Alabama with the Alabama Power Company
  • Digital Realty’s 88 MW with E.ON Climate and Renewables North America
We understand that there are many deals in the pipeline, and we look forward to being part of the announcement strategy.

BRC's Latest

Event Recap: Renewable Energy Buyer's Alliance May Summit

More than 250 executives attended the REBA Summit at Microsoft’s headquarters in Redmond, Washington this May with the objective of accelerating corporate procurement of renewable energy. Three key themes will be critical to scaling this market:
  1. New stakeholders are expanding the market
  2. New deal structures and solutions are poised to transform the market, including:
    • Risk allocation
    • The BRC’s Online Marketplace
    • Solutions for small buyers
  3. Companies are starting to look beyond the U.S. to explore international options
For a full recap, click here.

Upcoming Events

Save the Date
BRC East Coast Workshop
(by invitation only)
Detroit, MI, November 16–17 2016
Hosted by GM
GM Headquarters
  • BRC and PwC Webinar - August 3 - save the date

  • Clean Energy Trust - August 9 - Corporate Renewables Procurement Event

  • Solar Power International - September 12–15 - Detail

  • Clinton Global Initiative Annual Meeting - September 19–21 - Detail

  • Infocast’s Corporate Renewables 2016 - September 26–28 - Detail

  • Renewable Energy Markets 2016 - October 16–18 - Detail
Click here to view all of the BRC's upcoming events.



BRC’s 6-Month Work Plan

Following the REBA Summit, the BRC has committed to the following initiatives:
  1. Buyer Support
    • Holding a multi-day workshop for buyers that are new to the market to ask small or large questions, understand the procurement process and issues, and learn from each other.
    • Creating a brief, customizable “pitch deck” for buyer deal teams to use with their CFOs.
    • Adding new components to the BRC Marketplace that will allow buyers to understand the estimated avoided CO2 emissions of projects and a broad analysis of project economics across the U.S.
  2. Risk allocation
    • Developing an RFP template that buyers may use (as-is or with further customization).
    • Exploring new mechanisms to manage or allocate market risk while maintaining bankability.
  3. International markets
    • Working with BRC member organizations and relevant officials to develop a mechanism for off-site renewables procurement in China.
If you are interested in working with the BRC on any of these initiatives, please contact Ian Kelly (ikelly@rmi.org).

BRC Marketplace

Marketplace Image
The picture above is illustrative and does not reflect actual projects.
Since launching the Marketplace last November, our database has grown to include over 80 wind, solar, and hydro projects, with a combined generation capacity of 13 GW. These projects have been entered by 29 different developers and present small (<10 MW) and large (>200 MW) corporate off-site opportunities across the U.S. On the other side of the aisle, 54 individuals from 33 corporate buyers now have accounts on the system.

In addition to searching through posted projects, corporate buyers now also have the ability to anonymously request that developers upload and submit projects that meet their specific criteria using a streamlined RFI process.

To access the BRC Marketplace, please visit marketplace.businessrenewables.org (member-only login required).

Risk Allocation

Our landscape of PPA risks can be accessed at our (members) website:
  1. A risk allocation primer, which describes risks, options for allocations, and statistics on what options are most commonly used in transactions.
  2. A finance primer, which provides insights on what makes PPAs “bankable.”

Media Coverage

For a comprehensive list of media coverage, check out our Flipboard.

New Members

Welcome to our new BRC members who have joined since the April 2016 newsletter! We've grown from 28 founding members and sponsors in November 2014 to 134 members today.

New corporate buyer members include, among others, Allergan, Anheuser-Busch Inbev, AT&T, Cummins, George Washington University, HSBC, Kohler, Mars, Northrop Grumman, Tetra Pak, Western Washington University, and the U.S. General Services Administration.

New sponsors include, among others, 3 Phases Renewables, 8Minute Energy, Black Forest Partners, Clean Line Energy Partners, Citi Energy, Conergy, Engie, Gateway Clean Energy, Georgia Renewable Power, Geronimo Energy, Guzman Energy, Lendlease Energy Development, LevelTen Energy, Natural Capital Providers, PRC Wind, Net Lease Capital, S-Power, Southern Power, Sumitomo, TransAlta, Tri Global Energy, and Vestas.

Spread the news - BRC’s Marketing Manager

RMI is hiring a Marketing Manager who will be responsible for the BRC and other programs within RMI's Renewable Solutions practice. For more info click here.

Past Newsletters: View past newsletter issues online here.

Contact Us: Your feedback on this newsletter is most welcome. Please contact Jill Harley (jharley@rmi.org) or email brc@rmi.org.

This BRC newsletter is intended to provide factual information and is based on publicly available information, but no representation is made with respect to its accuracy or completeness. None of the information can be construed as investment or accounting advice. RMI reserves the right to include, change, or edit any content.

 
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