Corporate Demand for Renewable Energy Could Rock the Grid
Renewable energy is good for customers, the environment and the bottom line of corporations that run their operations with it. In the United States, though, renewables (including solar, wind, hydropower and biomass) account for only about 10 percent of all energy used and 13 percent of total electricity generated – even as corporate contracts for renewable energy nearly tripled from 2014 to 2015. If there are challenges now, when capacity and use are low, what will happen to business models, technology and financing when renewable power penetration reaches 30, 40 or even 50 percent of the U.S. market?
Since there’s plenty of corporate demand, the problem is supply, which in turn depends on adequate infrastructure to deliver it. Historically, U.S. utilities have decided what fuels to use to generate electricity, with scant incentive to increase the percentage of renewables in the energy mix or to explore technology to encourage that kind of shift.
We know there’s an appetite for many more gigawatts of renewable capacity, but it’s excessively difficult for large companies in the United States to buy as much renewable energy as they want. While retail customers in many states can arrange to buy solar or wind power from local utilities, companies need a large, sophisticated team to get access to renewable energy options at the scale they need – if those options are available at all.
To change this picture, it’s time to look to the demand side, where multinational corporations are joining together to make their preference for more renewable power felt.
Facebook and Microsoft are among 60 companies and over 50 leading project developers and service providers participating in a new network, the Renewable Energy Buyers Alliance, known as REBA, that aims to break down barriers to lower-carbon energy. The alliance aims to see 60 gigawatts – the same amount of total generating capacity of Turkey — of renewable energy deployed in the U.S. by 2025. That’s a huge jump from the 3 gigawatts of renewable power purchases companies signed in 2015, which was about triple the amount from the previous year.
Turning Supply and Demand on Its Head
Renewable energy is the rare case where the law of supply and demand can be turned on its head, due to the essentially limitless supply of raw material (sun and wind) and the potential to capture economies of scale through innovative technologies. It’s also a case where change can happen on the state and local level. With sluggish legislative progress on renewable energy at the national level, a national price on carbon emissions is unlikely in the near future. But a coalition of powerful companies with large and growing demand for power – and corporate goals for environmental sustainability – is a market force to be reckoned with.
A prime example is Facebook. The social media giant ultimately aims to use 100 percent renewable power in its data centers, with a near-term goal of 50 percent of energy from clean sources by 2018. So when it considers where to put a new data center, the availability of renewables is a central question. One of the corporate supporters of REBA, Facebook looks for locations where utilities can provide the renewably generated power it will need. The support of a long-term, well-capitalized corporate customer offers a powerful incentive for utilities to offer renewable power on a large scale.
Once the utility is set up to offer it to big corporate buyers, smaller businesses could join the trend. Facebook’s Director of Sustainability Bill Weihl said on a recent call to launch REBA that is part of the strategy: “We’re doing this not just for our supply, but to green the grid.”
Corporations are one of the fastest growing customer segments of the renewable energy market, in part because renewables are an important hedge against price variability in fossil fuels, according to Michael Polsky, CEO and founder of Invenergy, the largest privately owned wind power company in the United States. Polsky, a World Resources Institute board director, reckons that as the price of wind and solar continue to fall, economic benefits will rise, and increased demand will promote innovation, new technologies and greater efficiency.
New Avenues of Cooperation
The advances can come through new avenues of cooperation. In Virginia, Microsoft and local utility Dominion Virginia Power worked with state officials to get renewable energy to the grid with a new 20 megawatt solar project. Microsoft will purchase the renewable energy certificates (which help with its corporate sustainability goals), the project becomes more financially feasible for the utility, which builds a solar farm at no cost to other ratepayers. Everybody wins.
Businesses that want to go this route or others than foster renewable energy on the grid can use WRI’s new Corporate Renewable Energy Strategy Map to learn where to buy affordable renewable power at the scale they need from local suppliers. The interactive tool shows that even places whose prosperity has traditionally been linked to fossil fuels – such as Texas – can profitably offer customers a choice in how their electricity is generated.
We know corporate demand for more renewables is coming. We know it’s one way to prosper while cutting down on greenhouse gas emissions and other harmful air pollution. It’s time to listen to the demand side and let the supply side understand that it’s in their best interest to make this shift— for profit now and continued profitability down the line.
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