As Renewable Energy Costs Fall, Businesses Sign More Deals

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--As evidence grows that renewable energy can be cheaper than other forms of energy, including natural gas combined-cycle (NGCC) generation, businesses continue to sign power purchase agreements (PPAs) or build renewable generation at their sites. In recent weeks, Microsoft Corporation (NASDAQ:MSFT) (Redmond, Washington) and Walmart Incorporated (NYSE:WMT) (Bentonville, Arkansas) signed PPAs for wind generation. Those transactions were neither companies' first foray into renewable energy.

Other large businesses that have signed renewable energy deals include Target Corporation (NYSE:TGT) (Minneapolis, Minnesota), Cargill Corporation (Wayzata, Minnesota), Mars Incorporated (McLean, Virginia), AstraZeneca plc (NYSE:AZN) (Cambridge, England), Bank of America Corporation (NYSE:BAC) (Charlotte, North Carolina), Carlsberg Group (Copenhagen, Denmark), Facebook Incorporated (NASDAQ:FB) (Menlo Park, California), Johnson & Johnson (NYSE:JNJ) (New Brunswick, New Jersey) and General Motors Company (NYSE:GM) (Detroit, Michigan). Many of these companies pledged to rely on renewable energy for 100% of their electricity, with some choosing near-term dates like 2020 or 2025 and others choosing farther-off dates like 2050. Still, the trend is unmistakable.

For more on this, see February 28, 2018, article - Corporate America's Electricity Supply Growing Greener and January 26, 2016, article - Corporate America Boosts Commitment to Renewable Energy.

In an interview with Forbes, Cathy Woollums, senior director of sustainability for Mars, said: "Part of what gives us the momentum is there's a remarkable business case. We've got folks that are negotiating these deals and they're doing it such a way that so far--knock on wood--we are ending up in a positive place financially, deal after deal after deal."

Federal tax credits for renewable energy certainly bolster the economic case for renewable energy. But so, too, has recent research into the declining cost of renewable electricity compared to electricity generated by coal, gas or nuclear.

A report issued earlier this year by the U.S. Energy Information Administration (EIA) (Washington, D.C.), the statistical and energy analytic agency, found onshore wind and combined-cycle generation that were expected to begin operating in 2022 both had a levelized cost of electricity (LCOE) of about $48 per megawatt-hour (MWh), measured in 2017 dollars. Add in the tax credits, however, and the LCOE for onshore wind drops to $37 per MWh. With federal tax credits, solar photovoltaic pencils out at about $46.50 per MWh, just slightly under combined-cycle generation, found the report, Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2018. Advanced combustion turbines, by contrast, had a LCOE of $79.50 while advanced nuclear had a LCOE estimated at $90.10 per MWh, the report added.

The American Wind Energy Association (AWEA) (Washington, D.C.), the wind industry's main trade group, said corporate and other non-utility firms have signed PPAs for more than 10,000 MW of wind generation capacity.

While no profit-seeking business would be party to a deal that was a money-loser, factors aside from economics increasingly are playing a role in corporate decision making around renewable energy. Many companies, particularly those that sell consumer goods like cars, food, toys, medicine and beverages, are responding to customer expectations that businesses operate in a more sustainable manner.

Companies are using PPAs to lock in electricity prices for the long term, avoiding local electric price increases. The risk management benefits of a renewable PPA are appealing to corporate leaders seeking to manage or mitigate volatility.

A report this summer from Bloomberg New Energy Finance found that corporations around the world signed deals for more than 7,200 MW of clean energy during the first half of the year, eclipsing last year's record 5,400 MW of corporate clean energy procurement. About 60% of this year's corporate procurements were in the U.S., said the report, H2 2018 Corporate Energy Market Outlook.

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