by Emma Foehringer Merchant
June 20, 2019

Corporates procured record amounts of renewables in 2018, both in the U.S. and globally. According to numbers from Bloomberg New Energy Finance, 86 percent of global corporate renewables deals were signed in the last three years. Forty percent were signed in 2018. Numbers from Wood Mackenzie Power & Renewables show corporate solar deals drove nearly a quarter of the overall 2018 solar market.

Pushed by economics, a desire to present a portrait of sustainability to customers and urgency associated with the impending stepdown of the Investment Tax Credit, companies are keeping pace with last year’s U.S. solar purchases. About five months into 2019, solar deals already account for 20 percent of capacity signed. 

A spate of recent announcements, many with novel structures, show that a wider diversity of contract types coupled with falling prices have helped corporate procurement become a key driver of the solar market's growth.

Colin Smith, a senior solar analyst at Wood Mackenzie Power & Renewables, offered a wry take on the synthesis between smart business and the do-gooder image companies are scrambling to take advantage of.

“There are still people that think corporate procurement of large solar plants is solely driven by a desire to save the environment, or be more sustainable, without really considering cost savings,” said Smith. “Groups like Facebook and Target aren’t doing this out of the goodness of their heart. … In aggregate, they’re saving millions of dollars by signing these long-term procurement contracts.”

It’s all about the money — and public image

To that point, economics remains the biggest reason corporate procurement of renewables has grown — this is business, after all. In a Deloitte report released last week 47 percent of surveyed businesses said they’re looking to procure more renewable electricity, and respondents reported economics as the largest driver for resource management programs and decisions.

Half of business respondents said the desire to cut costs motivates energy management decisions. Nearly 90 percent of companies said they now see energy procurement as a way to create value rather than as just a cost to their business, up from 81 percent in the 2017 and 2018 editions of the survey.

A clear example of the strength of that trend, Smith said, are recent announcements from oil and gas companies like Shell and Exxon, who have recently procured large-scale wind and solar.

“When you’re seeing these big oil corporations that people are typically thinking of as antagonistic or against solar starting to acquire hundreds of megawatts of solar, that’s really sending the message that this is a cost savings mechanism,” Smith said.

At the same time, companies appear to be acquiescing to some consumer pressure. According to Deloitte, roughly two-thirds of survey respondents reported customers “demanding” renewables procurement. That’s a good PR story for businesses: 72 percent are actively broadcasting those purchases.

“It not only makes financial sense for them, but it’s also a good PR move for these groups as well,” said Smith.

Not just for Google, anymore

Large tech companies looking to purchase significant portions of clean energy have traditionally led corporate and industrial renewables procurements. Google, Facebook and Amazon all have 100 percent renewables targets (whether they’re all making progress on those commitments is another story).

Though the C&I landscape is changing, the tech trend still holds, according to a WoodMac report published in January. At the time, the research group reported that capacity purchased by Google, Facebook and Amazon accounted for about 35 percent of the overall corporate renewables market. Tech and data companies more broadly remain the largest segment for offtake agreements.

But the economic pull of renewables is now drawing in a wider array of customers. Analysis from WoodMac shows 19 new entrants to the market in 2018, compared to 16 in 2017 and 11 in 2016. Most companies are still acquiring renewables using power purchase agreements (PPA) or virtual PPAs, but unique financing and contract arrangements mean renewables projects are now available to more companies.

Recently, for instance, both Starbucks and beverage behemoth Anheuser Busch announced noteworthy renewables purchases. Anheuser Busch’s deal, for 222 megawatts in West Texas, demonstrates the increasing pressure companies face to move towards sustainable business practices. With its signing, the maker of Bud Light said it expected to reach its 100 percent renewable electricity target several years early.

Texas is becoming a go-to location for C&I customers. In April, Starbucks announced a deal with Cypress Creek Renewables to power 360 stores in the state with solar produced there. At the time, WoodMac’s Smith said it indicated the growing sophistication in corporate renewables purchases because the coffee company was purchasing power for hundreds of stores rather than one large-scale building or data center.

All about aggregation

A more recent Starbucks deal, unveiled earlier this month, hints at another growing trend: aggregation. One-upping its previous commitment in Texas, the chain said it would provide power to 3,000 stores across several states with an aggregated portfolio of three projects, also located in different geographies, totaling 146 megawatts of wind and solar.

It’s another example of the growing complexity of C&I deals.

LevelTen Energy, a renewables marketplace catering to businesses, worked with Starbucks on the purchase structure. In January, LevelTen led a small-scale aggregation deal with companies including Bloomberg, Salesforce and Gap. Each company procured between 5 and 10 megawatts of energy but worked together to procure the total 42.5 megawatts. A recent fundraise for LevelTen, the company said, demonstrates corporate “hunger” for a more flexible way to buy renewable energy.

Aggregation deals aren’t entirely unique in the corporate space. Apple has engaged in several where it’s the anchor offtaker. But the small size of the LevelTen aggregation deal and the innovative structure of its project with Starbucks show companies are becoming more adept at negotiating contracts and bending them to fit their goals.

Companies are also increasing their reliance on on-site generation, according to Deloitte’s results. Companies installing solar and wind on their properties anticipate reducing their purchased electricity by 5 percent. Those companies said they’d supplant the supply of electricity they purchase from power companies with on-site generation and cogeneration as well as offsite renewables.

Solar, at home on the range

Companies are also getting creative when it comes to construction. Utility-scale solar allows for economies of scale, but it also requires large swaths of land. In states like California, with large agricultural productivity and high solar potential, that’s created a conflict over land use. A 2015 study found that more than 27,000 acres of farmland and more than 9,000 acres of pasture in the state had been converted to use for utility-scale solar systems.

A recently completed 280-megawatt solar project on Hearst Corporation’s Jack Ranch in central California, built by First Solar and Capital Dynamics, suggests those uses are not mutually exclusive.

The 73,000-acre property is an operating cattle ranch with lots of grazing room for grass-fed beef. The newly-built California Flats solar project takes up about 2,900 acres of the property.

To make sure the solar project would not impede ranch operations or hurt sensitive habitat for species that live there, like California-protected golden eagles and endangered kit foxes, First Solar said the design involved a bit more planning than the average project.

“Some of the challenges in construction were a little bit different,” said Laura Abram, First Solar’s director of project execution and public affairs. “You had to set up buffers in areas to protect where there were active nests or active kit fox.”  

To accomplish that, the project wasn’t built in one big block. Instead, its design takes advantage of the “natural contours of the land,” according to Ben Higgins, Hearst’s director of agricultural operations. That allows grazing cattle to pass through the array if necessary.

Higgins said Hearst also insisted on sheep grazing for vegetation management, rather than chemicals.

“We still own this land. We plan to own it for many decades to come — well beyond the lease term. And we wanted to make sure that this was managed and the vegetation controlled in a sustainable way,” said Higgins. “We had near-daily communication through the development and construction process … It sounds like an obvious thing, but it certainly was not.”

Because the project included buildout of water infrastructure previously unavailable on that portion of the property, Higgins said the project’s construction may actually increase cattle carrying capacity.

That’s a help because, Higgins noted, the ranch has been an “underperforming asset” for Hearst. The ranch isn’t buying any of the power the project produces, instead selling it to Apple and Pacific Gas & Electric, allowing Hearst to make money off the project’s land-lease.

“With California Flats now online and generating revenue … we have an alternative form of revenue that subsidizes the cattle operation in lean years and staves off this more intensive development pressure for many decades to come,” said Higgins. “We view California Flats in many respects as a conservation solution for the ranch.”

It’s a nice story for Hearst, and one that’ll also keep its pockets flush.