Big-name companies urge utilities to produce more renewable energy

Source: Julia Pyper, E&E reporter • Posted: Tuesday, July 15, 2014

To meet their sustainability goals, 12 large American companies signed onto a set of buyers’ principles last week calling on utilities to expand and streamline opportunities for renewable energy procurement.

The companies, including Bloomberg, General Motors Co., Sprint, Wal-Mart and Mars, are looking to engage with energy suppliers, particularly with debates on the future of the electricity system underway across the country.

“[These principles] are going to help, hopefully, make it easier to align and amplify the business voice around purchasing renewable energy, because right now all of these energy projects are negotiated on a case-by-case, one-off basis,” said David Tulauskas, director of sustainability at General Motors. “The large renewable buyers really don’t have the leverage in this situation. This is one way to create a common and consistent voice.”

Many U.S. companies are driving the market for renewable energy. But to purchase renewable energy at competitive prices, large-scale buyers often have to work around traditional utilities, increasing complexity and transaction costs.

The principles, coordinated by the World Wildlife Fund and World Resources Institute, outline six criteria that would make it significantly easier for companies to meet their purchasing goals. These criteria include longer- and variable-term contracts, streamlined third-party financing and access to new renewable energy projects.

“Companies are setting aggressive clean energy and climate goals, and they’re serious about meeting those goals,” said Marty Spitzer, director for U.S. climate and renewable energy policy at the World Wildlife Fund. “Purchasing renewable energy is an important part of their strategies, and they’d like it to be a lot easier to bring on the scale of the renewable energy they need.”

The 12 participating companies represent a combined renewable energy target of 8.4 million megawatt-hours per year through 2020, equivalent to the energy consumed by roughly 800,000 U.S. homes per year.

Companies aren’t going after renewable energy projects just because it makes them good environmental stewards; they also want access to affordable and reliable power.

“Prices have fallen dramatically in renewable technology, plus there are all these benefits to renewable technology — there’s a fixed price, there’s no price uncertainty, it doesn’t face any regulatory uncertainty going forward, it has lower risk and often lower price than a fossil fuel,” said Letha Tawney, a senior associate at the World Resources Institute.

Hoping to create a more predictable market

Once a renewable energy project is built, purchasers know what the cost of that energy will be for the next 15 years, she said. That’s unlikely to be the case with gas and coal plants, particularly with environmental regulations expected to tighten.

To develop their own renewable energy projects, companies are having to learn how to operate like utilities, when they would prefer to let utilities manage the energy generation and buy the renewable energy that they need.

Some companies simply don’t have the resources or interest to become energy generators and so have shied away from renewables altogether.

“We know cost-competitive renewable energy exists, but the problem is that it is way too difficult for most companies to buy,” said Amy Hargroves, director of corporate responsibility and sustainability for Sprint, in statement.

“Very few companies have the knowledge and resources to purchase renewable energy, given today’s very limited and complex options,” she continued. “Our hope is that by identifying the commonalities among large buyers, the principles will catalyze market changes that will help make renewables more affordable and accessible for all companies.”

For example, companies are calling for access to so-called bundled renewable power and renewable energy credits (RECs).

In today’s regulatory framework, companies voluntarily pay for RECs on top of their regular electricity bills to claim they support renewable energy projects. However, the electrons these projects produce may be consumed elsewhere.

With REC prices at extreme lows in many states, there’s no guarantee that buying credits is driving the development of new projects. So by buying renewable energy and credits together, or bundling, companies know they’re adding to overall renewable energy capacity.

According to Spitzer of the World Wildlife Fund, the corporate voice has been missing from this and other conversations on utility reform.

“There’s a lot of soul-searching going on within the utility industry about the future of the business model because of all of the efficiencies that are taking place and the renewable energy that’s coming online,” he said. “Some of the utilities are thinking about how they can innovate in that new world. And these companies, these large buyers, are saying to their suppliers, ‘We’d like to work with you to figure this out and do it in a way that helps us and you.’”