Corporate Renewable Energy Buyers’ Principles Highlight the Promise of Consumer/Utility Collaboration in Renewable Power Procurement

by Akin Gump Strauss Hauer & Feld LLP
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As we wrote earlier this year, end-use corporate energy consumers large and small are increasingly turning to distributed power generation using solar, wind and other technologies to reduce purchased power costs and price volatility, earn tax benefits, improve reliability and meet customers’ environmental stewardship requirements.1 But, for some companies, investment in distributed renewable generation at the required scale can be infeasible, uneconomic or otherwise unattractive, prompting such consumers to seek alternative means to procure renewable power to serve similar ends. While the renewable power market continues to expand, large-scale corporate end users still face numerous challenges to increased use of renewable power, including diverse, complex market structures, premium pricing and access to cost-effective and functional solutions to meet their needs.2

In an effort to address these challenges, 12 major U.S. companies, including Facebook, Walmart, Johnson & Johnson, Intel, Mars and General Motors, with the help of the World Resources Institute and the World Wildlife Fund, recently developed and published a set of Corporate Renewable Energy Buyers’ Principles (Principles). If successfully implemented, the Principles could substantially improve the relationships between large consumers and utilities, increase the availability of cost-competitive renewable power products and options, and reduce market complexity and transaction costs.3 The Principles, which are designed to, among other things, encourage collaboration between large-scale corporate energy consumers, utilities and power suppliers, incentivize utilities and suppliers to offer more cost-competitive renewable energy products to meet diverse customer needs, and maximize the complementary business, environmental and social benefits of renewable power production, set forth six principal needs and expectations:

  1. increased choice in options to procure renewable power to meet business goals and customer requirements;
  2. cost-competitiveness of renewable vs. “traditional” power, including pricing reflective of the comprehensive costs and benefits to the power system of renewable power;
  3. fixed-price renewable power purchase contracts with varying durational options to increase price certainty and avoid price volatility;
  4. better access to products and options that promote renewable power project development and actually reduce overall emissions, including bundled renewable energy/Renewable Energy Credit (REC) products, prevent “double counting” of REC-related environmental benefits, and enhance local economies and communities and grid resilience and security;
  5. better access to third-party financing and power purchase agreements and streamlined, simplified contracting and project financing processes;
  6. more opportunities to work with utilities, suppliers, and regulators to design and develop innovative renewable energy products and purchase options that fairly allocate costs and benefits and can be deployed for existing as well as new end-user load.4

The Principles offer a wide range of potential benefits to corporate energy consumers and the utilities and suppliers that serve them:

First, the Principles show that significant, large-scale corporate consumers are interested in working with utilities to meet their renewable energy needs.

Second, to the extent that implementation of the Principles further strengthens the business case for large commercial and industrial customers to purchase more renewable power, other similar large-scale consumers might become more likely to pursue similar options. As market participation grows, so should customers’ ability to influence the products and options that are available.

Third, successful implementation of the Principles, by increasing the likelihood that large-scale corporate consumers will work with their utilities, rather than around them, to procure more renewable power, should benefit utilities, suppliers and consumers alike as all involved can reap significant benefits from streamlined processes and reduced transaction times and costs.

Finally, a streamlined market that facilitates large-scale consumers’ purchases of more renewable power should enable more companies to commit to and successfully achieve clean energy goals faster and at lower cost, producing a competitive advantage and possibly increasing overall revenue. The potential benefits of this positive feedback loop are immense.

Whether these Principles will be effective in encouraging utilities to make available or facilitate the products and options requested by the initial signatories to the Principles remains to be seen. In any event, competitors of and companies like the initial signatories may wish to take notice of the Principles and consider the potential benefits of actively supporting them or pursuing similar market changes with their own utilities.


1 Julia E. Sullivan et al., Why End Users Are Investing (Big) in Distributed Generation, 27:2 Elec. J. 23-32 (2014). 

2 Joshua Ryor, Tackling U.S. Corporations’ 3 Challenges to Buying Renewable Energy, World Res. Inst. Blog (July 11, 2014), http://www.wri.org/blog/2014/07/tackling-us-corporations%E2%80%99-3-challenges-buying-renewable-energy.

3 Corporate Renewable Energy Buyers’ Principles: Increasing Access to Renewable Energy (July 2014), http://www.wri.org/sites/default/files/Corporate_Renewable_Energy_Buyers
_Principles.pdf
.

4 Id.  See also Press Release, World Res. Inst., Major U.S. Companies:  Unmet Renewable Energy Demand Requires Market Shift (July 10, 2014), http://www.wri.org/news/2014/07/major-us-companies-unmet-renewable-energy-demand-
requires-market-shift.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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