Demand by the largest U.S. companies' demand for renewable energy could grow to as high as 85 GW through 2030, according to a recent report by energy research firm Wood Mackenzie and trade group the American Wind Energy Association.
Interest by non-utility companies in procuring renewable energy has been driven by two critical factors, according to the Aug. 21 report: the declining prices of wind and solar; and growing pressure from both investors and consumers on environmental, social and governance issues. Commercial and industrial, or C&I, customers contracted for more than 6,000 MW of renewables power purchase agreements in 2018, with tech companies such as Facebook Inc. and Google LLC and retail giants like Walmart Inc. leading the way.
While non-utility companies continue to look at corporate procurement to fulfill sustainability initiatives, renewable energy sources make up just 5% of the power mix for Fortune 1000 companies. An Aug. 20 lawsuit filed by Walmart against Tesla Inc.'s solar unit Tesla Energy Operations, Inc over solar panels installed by SolarCity Corp. that allegedly sparked fires at several stores could put a damper on corporate procurement's image. But several analysts anticipate C&I customers' appetite for on-site and off-site renewable power will only increase.
"We don't expect the demand for PPAs by corporates to decline — we only expect it to increase," said Marlene Motyka, a principal who leads Deloitte Transactions and Business Analytics LLP's U.S. and global renewable energy segment. Customer demand will continue to push businesses to seek out green energy, whether it is through a traditional power contract, virtual PPAs or an alternative arrangement, such as renewable energy certificates or green tariffs.
"Electricity suppliers will continue to offer PPAs with different tenures and even those that are less than 10 years," Motyka said in an email. "But they may also need to offer more comprehensive packages and consider such things as battery storage."
Creating renewable energy products with a variety of terms is especially key to satisfying and growing corporates' demand for clean energy, said Dan Shreve, head of wind research at Wood Mackenzie and lead author of the report. Virtual PPAs "will remain the mainstay" of these contracts, while green tariffs are a product Shreve believes will grow in coming years.
Moreover, as non-utility companies grow and expand their geographical footprint, their electricity usage is going to go up, he added.
"The fact of the matter is that utilities need to evolve," Shreve said in an interview. "In order to evolve, they need to work much more closely with some of their more strategic clients ... utilities, state regulators and state legislators all need to work hand in hand to try to ensure they're providing the most competitive product."
That will also be important to expanding corporate procurement beyond blue chip companies, both Motyka and Shreve said.
"More recently smaller C&I customers have the ability to participate in PPAs by aggregating their smaller amounts of renewable energy demand to collectively enter into a virtual PPA," Motyka said. "This opens the door for many more C&I customers to procure renewables."
On Aug. 21, Duke Energy Corp. received approval to offer North Carolina C&I customers new options to secure renewable power, or renewable energy certificates. On the same day, Portland General Electric Co. said C&I customer interest in its renewable program has been so high it could add 300 MW of renewable capacity to its system to accommodate demand.
With utilities increasingly becoming direct owners of large-scale renewable energy projects, they are learning how to work with C&I buyers, Shreve said. Over time, the utilities can take that knowledge from working with major corporations and use it to help smaller market cap companies reach their energy goals.
"You have much smaller clients that are clients that are equally ambitious in terms of their sustainability goals and want to be able to procure renewable energy but might not have the teams in place to cultivate what is still a fairly complex financial transaction in the form of these [virtual PPAs]," Shreve said.