Sponsored Content: Q&A with a Leader – Altenex
Blaine Collison will be a panelist at the Environmental Leader Conference on June 21-23 in Denver. His panel, Corporate & Industrial Renewable Energy Procurement Strategies, will be at 2:30 on June 22. We were able to catch up with him for a brief Q&A on his thoughts on the state of the industry and what he sees moving forward. To learn more about the EL Conference, visit the conference site.
Renewable energy is one of the most compelling economic and environmental strategies available to U.S. corporate and industrial energy users today. Renewable energy – properly identified, analyzed, structures and executed – will save money, stabilize energy cost volatility, and greatly reduce an organization’s greenhouse gas emissions. Renewable energy is available to companies across the North America and more and more companies are entering into Power Purchase Agreements (PPAs) for some or all of their electricity consumption.
1. Doesn’t renewable energy cost more? Absolutely not! Renewable energy will save companies money. Wind and solar prices have continued to drop as technology improves and development costs decline. In many markets around the U.S., renewable energy is the least-cost new generation to build. And companies like General Motors, 3M, Procter & Gamble, Home Depot and others are executing these deals because they save money, often from day one.
2. My company has facilities all over the state/region/country: How do I think about getting renewables to all of those facilities? PPAs are most often structured as wholesale market transactions in which the renewable energy isn’t actually delivered to a specific facility or set of facilities. So a company will put a renewable energy PPA in place essentially in parallel to its commodity electricity procurements. This reduces complexity while retaining all of the financial and environmental benefits associated with renewables. The session will specifically review this structure and how GM and 3M have leveraged it.
3. What’s the return on investment (ROI) for renewables? Our internal competition for capital is ferocious. Because PPAs don’t require any capital commitment from the corporate customer, the ROI is infinite. When a company signs a PPA, its commitment to buying the project’s output allows the project developer to secure construction financing. The company doesn’t pay anything until the project is up, running and producing power and renewable energy certificates. There is absolutely no need for a company to deploy its own capital to secure the benefits of renewable energy.
4. How long is the typical PPA? As recently as three to five years ago, PPAs were typically 20-25 years. Now, most companies are able to execute PPAs that range from 10-15 years. This can be very helpful in getting senior leadership comfortable with making a renewables commitment.
5. Is renewable energy an on-site strategy, an off-site strategy or both? Yes! On-site renewables – typically solar – is an incredibly compelling opportunity for companies with the right facilities; good solar resources and local regulatory market conditions, facility ownership or favorable leases, roof age, etc. At the same time, most facilities are able to meet less than 20-25% of their energy requirements with on-site deployments. For companies with GHG goals or that are looking to renewables to help manage energy price risk, looking at off-site opportunities – which tend to be developed at a more industrial scale – will be an important strategy. Altenex typically helps clients look at and capture an optimized blend of on- and off-site opportunities.
6. I’m already getting calls from project developers: How do I identify the right one(s)? Many environmental managers report a similar experience: They’re deluged by calls from suppliers, project developers and others, all promising career-making economic performance. There are more than 5,000 renewable energy projects in North America: Which one is right for a given corporate customer? Much of what’s offered sounds too good to be true, which raises the fundamental question: How does a company understand which project(s) meet its needs? Which projects offer the right economic value? Which mitigate risk? Which organizations will be good partners and which won’t? It’s very difficult to ask all of the right questions without some expertise in knowing what to ask. Successful companies address this challenge by comprehensively evaluating the marketplace. Specifically, it’s important to have current tracking, development, economic and risk data in hand which enables energy managers to quickly identify compelling opportunities that may align with their company’s specific needs and criteria.
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