Over the past few years, America has seen a number of its largest companies switch their energy consumption over to 100 percent renewable sources. Back in the early days of solar and wind, firms like Google, Apple, and Walmart sought power purchase agreements (PPAs) from renewable energy developers to help meet their (mostly self-imposed) corporate sustainability goals. Being large companies with “deep pockets”, Google et. al were not necessarily concerned with the short-term economics associated with purchasing renewable energy and, instead, decided they could reconcile the financial impact by attracting new customers and increase their top-line revenue by “going green”.
Up until recently, the conventional thinking among corporate energy purchasers was that pursuing a renewable energy PPA only made sense from a “good will” perspective and the financial justification for executing one was “shaky” at best. However, with the considerable advances in technology and manufacturing, the cost of solar has decreased to a point to where businesses much smaller than Google and Apple can confidently justify the transition to renewables and, as a result, actively manage their energy costs. The question then becomes: exactly what financial advantages do today’s PPAs offer to corporate energy buyers?
In their white paper entitled “The Economic Case for Renewable Energy”, John Powers and Amy Haddon of Renewable Choice Energy present three considerations for why PPAs make perfect financial sense for commercial and industrial (C&I) businesses. These include:
- A bottom line impact – Technology-based power generation, which is not dependent on the fluctuating price of fossil fuels, allows renewable energy developers to offer a fixed-price to their corporate off-takers.
- Short position exposure – Electricity prices are dependent on the energy supply, coupled with demand, and they tend to have seasonal peaks. In many markets it is impossible to purchase electricity more than 2-3 years into the future, which subjects corporate energy buyers to fluctuating market prices over the long-term. Renewable energy PPAs allow for much longer pricing terms which insulate buyers against these fluctuations.
- Financial risk management – Most industry experts would agree that the future direction of government regulation relative to carbon footprint is unpredictable. Future directives, such as an imposed carbon tax, could economically hinder organizations to a dramatic degree.
Likewise, Sunpower, a leading US-based manufacturer of solar panels, puts forth in an article, Understanding Commercial Solar Financing Options: Power Purchase Agreement (PPA), several data-based PPA financial advantages that speak directly to corporate energy buyers. They include:
- $0 capital investment: There is usually no upfront costs associated with entering into a solar PPA.
- No ongoing operations and maintenance (O&M) costs: The energy developer pays for the O&M of the solar system, not the energy buyer.
- No production or performance risks: Under a PPA, the corporate energy buyer does not incur any expenses whatsoever if the renewable system does not produce energy because of damages caused by nature or other unforeseen events.
Are you an energy buyer for your organization who is trying to determine whether executing a renewable energy PPA make sense? Here are two solid reasons why we believe you should give it serious consideration:
Solar PV technology costs continue to drop: According to GTM Research and the Solar Energy Industries Association (SEIA), the unit cost for solar (in $ per watt) has decreased 80 percent from 2009 levels and continues to drop. Furthermore, the justification for executing a PPA has never been more financially compelling and is no longer a prickly conversation with senior management.
Meet Your Sustainability Goals…Without the Headaches: Solar PPAs enable your business to take advantage of clean, renewable energy, actively manage your energy costs, and avoid all the O&M expenses associated with keeping a renewable asset in service. Additionally, PPAs can be easily be tailored to meet the specific financial needs of your business.
When looking to buy energy, keep in mind that an experienced renewable energy developer will be uniquely positioned to adequately address your PPA concerns and successfully guide you along your journey to an expanded renewable portfolio. Holocene Clean Energy finances, constructs, and sells complete solar PV systems and executes PPAs for smart energy buyers. As such, Holocene fully engages itself in the entire solar project lifecycle and is able to offer clients a streamlined and seamless renewable energy sourcing process from an engineering, business and legal perspective.