Table of Contents:
Market Insight and Recent Deals:
State of the Market
The corporate off-site PPA market enjoyed high growth over the past few years and a spectacular 2015 in particular. The year 2016 is a slower one for the market, in part because the December 2015 multiyear extensions of the Production Tax Credit and Investment Tax Credit by the U.S. Congress alleviated the pressure to close deals quickly, and also in part because lower wholesale electricity prices across the country have made it more challenging to identify projects that are in the money. Cumulative deals signed in the first three quarters of 2016 have been at 226 MW, 272 MW, and 416 MW, respectively. From our market intelligence, we anticipate a fourth quarter that should bring 2016 to slightly above the 1.18 GW realized in 2014.
Building Consensus on Risk Allocation
Having had a slower year in 2016 than in 2015, market participants are taking more time to reflect on deal execution issues that could hinder further growth. Two of these issues are related to risk allocation between project developers and corporate buyers.
The BRC is working to support a healthy and growing PPA market for corporate buyers, project developers, investors, and other market participants to the benefit of all. From education on risk mitigation to innovative financing strategies, we look forward to having in-depth conversations with many of you at our upcoming conference in Detroit on November 15 - 17.
- Issue #1: Some signed corporate PPAs turn out not to be bankable. One example would be a PPA containing clauses that give corporate buyers too many options for walking away from the contract and, as a consequence, too little comfort to lenders for them to finance the project. The net result is that buyers and developers waste time, effort, and money to no avail. We are interested in collecting specific examples of such unfortunate situations - in all confidentiality - in order to ensure the BRC community is fully aware of the pitfalls to avoid. To discuss, please contact Ian Kelly at firstname.lastname@example.org.
- Issue #2: Some corporate buyers are signing PPAs in which they take on risks they cannot appropriately manage. For example, based on a survey of BRC member organizations, only about one third of corporate PPAs are settled at a hub, introducing a basis risk that many corporate buyers are not well suited to understand or manage. In the case where neither the buyer nor the seller are willing to carry the basis risk, a third party could intervene and propose to take on that risk for a fee. If you are interested in knowing more about this approach, or providing solutions that the BRC community should be aware of, please contact Steve Abbott at email@example.com.
BRC's Inaugural Buyer's Bootcamp
BRC hosted 17 corporate buyers at the RMI Innovation Center in Basalt, CO, this past August for our inaugural Buyer's Bootcamp, a three-day interactive training and education on the fundamentals of corporate PPAs. The 17 buyers jointly represented 19 terawatt hours of annual electricity demand. Faculty included six industry leaders with transactional experiences who provided real-life examples, insights, and recommendations.
The bootcamp was also a great opportunity to better understand corporate buyers' needs and what options were available - or not - to address these needs. In particular:
- There was no general agreement among buyers on whether projects should be facility-specific or not. The needs of these two categories of buyers are clearly different, and both exist in the market.
- Some buyers were most interested in signing PPAs from projects located close to one of their facilities. These buyers were usually also interested in finding ways to ensure that the wholesale market price exposure from their PPA would be as close as possible to the implicit market price exposure from their electricity supply contract for their facility. These buyers were interested in working with intermediaries (market makers, utilities) either on the PPA side or on the electricity supply side to minimize their price risk exposure.
- Other buyers were less concerned about perfect price hedging, but were more focused on signing a PPA that would cover the renewable requirements of a portfolio of locations, possibly in different states. Those buyers were more interested in advanced price risk structures.
And finally, some of the extra-curricular highlights of the bootcamp included: a ride up the Aspen gondola to view a meteor shower from 11,000 feet, and tours of two net-zero energy buildings: the RMI Innovation Center and Amory Lovins's "banana farm," a fossil-fuel-free home that grows bananas in the middle of winter in the Rocky Mountains.
- A related topic was whether corporate buyers should minimize the number of PPAs for a given volume of renewable energy, or should diversify their PPA portfolio. Again, different buyers had different perspectives.
Participants in the first inaugural BRC Buyer's Bootcamp at
We plan to hold our next Buyer's Bootcamp in Basalt in February 2017. If you are interested in participating, send us an email at firstname.lastname@example.org.
Amory's zero energy home and banana farm.
Celebrating Recent Deals
Congratulations to our members (in bold) on their most recent deals.
We understand many deals are in the pipeline, and we look forward to supporting our members in their deal announcement strategy. Please contact BRC's marketing manager, Kevin Haley (email@example.com), to discuss how the BRC can support.
|See You Soon!
BRC 2016 Conference
(by invitation only)
Detroit, MI, November 16-17 2016
Hosted by GM
Thank you to our generous sponsors:
Renewable Energy Systems (RES), sPower
Altenex, Brookfield Renewable, EDF Renewable Energy
BayWa r.e. Solar Projects, CustomerFirst Renewables, Lendlease Energy Development LLC
Members of the BRC team are presenting at the following upcoming events - please feel free to get in touch if you would like to meet up.
Click here to view all of the BRC's upcoming events.
- October 25-26: GTM U.S. Solar Market Insight, San Diego, Details
- October 26-28: NAEM EHS & Sustainability Management Forum, Denver, Details
- November 1-3: BSR Conference 2016, New York, Details
So far, the only practical way to procure renewable energy in China with additionality has been to invest in renewable assets - something few buyers have been interested in doing. The newly established interprovincial transaction centers, coupled with virtual PPAs, provide a potential solution to this problem.
This approach should not necessitate project-level investment, would provide additionality by increasing dispatch priority of wind or solar assets, would not require long contract tenors, and should be price competitive. The BRC China team is recruiting BRC member companies to join a buyers consortium to explore the feasibility and pilot the concept in China. If you have interest in learning more, please send us an email at firstname.lastname@example.org with subject line "China."
Engaging the University Market with Second Nature
The BRC and Second Nature, a Boston-based organization and founder of the Climate Leadership Network of higher education institutions, are excited to announce an official partnership to unite the nation's top clean energy businesses with the colleges and universities leading on climate action. The 600+ signatories of the Climate Leadership Network will be able to join the BRC as university buyers to access the educational materials available online (including primers and case studies) as well as the BRC's renewable energy project database, the Marketplace.
For more information, visit the BRC University page or the Second Nature partnership page
BRC's Product Development Pipeline
Beyond our BRC China efforts, risk allocation work, and August Buyer's Bootcamp described above, we are also developing several additional products:
Proposed: "Corporate Buyers' Bulletin Board" - A number of BRC members and sponsors suggested that we make a moderated bulletin board reserved to members available on our platform. This would be a place where buyers could post questions to the community and benefit from the experience of other buyers.
- "Fair Value" analytics platform - This will be the next major addition to the BRC Marketplace. Buyers today can use the Marketplace to search renewable energy projects available for PPAs. However, they currently have little insight into where projects are more likely to be economically viable. Our "Fair Value" tool will add solar and wind project economics layers to the map, comparing the estimated cost of production of a farm with wholesale market price at the point of injection. We expect version 1.0 of this new platform to be available by the November conference.
- "RFP Template" - Arising from our work on risk allocation in PPAs, we also plan to debut a new RFP template by November that buyers can use to gather project proposals from developers.
- "CFO Pitch Deck" - A product requested at the last conference was a slide deck that buyers could customize for use in pitches to senior internal decision-makers. We have been collecting samples and advice from the market, and are in the process of synthesizing a new deck to make this available to BRC membership in November.
We would be curious to hear from you if you would find value in this functionality. If you have strong views on this topic, send us an email at email@example.com with the subject line "Marketplace Forum."
News from the BRC Marketplace
During the last quarter, corporate buyers began using the Marketplace's Project Request feature. This streamlined RFI process allows buyers to quickly and anonymously communicate their requirements to developers and identify projects that meet their needs. This functionality is now available for posting project requests outside the United States.
The BRC has partnered with WattTime, an information technology nonprofit created by two Berkeley Ph.D. graduates, to estimate the CO2 emission reductions that would result from connecting a particular wind or solar farm to the grid. Their calculations are based on marginal CO2 emission reductions and not on averages, which makes them much more accurate than existing methods. We have deployed WattTime's technology for wind or solar farms from California to Texas to Pennsylvania. Look for the "WattTime CO2 Reduction Estimates" portion within each project's detailed description in the BRC Marketplace.
This is a visual representation of WattTime's real-time carbon-intensity analysis, which is used to estimate the CO2 savings enabled by wind or solar plants across the country.
On the supply side, our Marketplace has grown to include over 110 wind, solar, and hydro projects, with a combined generation capacity of 18 GW. These projects have been entered by 38 different developers and present small (<10 MW) and large (>200 MW) corporate off-site opportunities across the U.S. and internationally.
To access the BRC Marketplace, please view http://marketplace.businessrenewables.org (members only). Those with questions should contact Steve Abbott at firstname.lastname@example.org.
Welcome to our new BRC members who have joined since the July 2016 newsletter! We’ve grown from 28 founding members and sponsors in November 2014 to 155 members today.
New corporate-buyer members include, among others, Berry Plastics, Gap!, Happy Family Brands, Harvard Office of Sustainability, IBM, Iron Mountain, Love’s Travel Stops, Novozymes, PepsiCo, Saint-Gobain, and four anonymous members, including a retail bank, a food and beverage company, a biopharmaceutical company, and a heavy manufacturing company.
New sponsors include, among others, Aligned Intermediary, Calpine, EDP Renewables, Hannon Armstrong Capital, Mercatus, Pattern Energy Group, Resort Energy Ventures, Southern Company, Swiss Re, and Sutherland Asbill & Brennan LLP.
In need of extra resources? EDF Climate Corps Fellows
For those of you who are interested in getting extra resources, we highly recommend working with EDF Climate Corps - a summer fellowship program that embeds trained, custom-matched graduate students inside leading organizations to accelerate clean energy projects and strategy. Since 2008, EDF Climate Corps fellows have identified approximately $1.5 billion in clean energy savings for 400 unique organizations. EDF Climate Corps fellows are well suited to help your organization examine renewable energy opportunities, model financial and environmental savings, draft strategy, and work closely with your existing team to accelerate the pace of projects.
To get involved, companies must submit a simple application before February 3, 2017. For more information, contact Scott Wentzell (email@example.com).
Past Newsletters: View past newsletter issues online here.
Contact Us: Your feedback on this newsletter is most welcome. Please contact Jill Harley (firstname.lastname@example.org) or email email@example.com.
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.