Company looks to be the ‘middleman’ to expand corporate green energy 

Source: Krysti Shallenberger, E&E reporter • Posted: Friday, May 15, 2015

Google, Microsoft and Yahoo are all getting into green energy in a big way.

But for companies with a lack of capital or direct access to energy sources, going green isn’t so easy.

Corporate power purchase agreements from renewable energy providers have surged in popularity amid a slew of policies aimed at increasing renewable power sources in states and nationwide. But signing off on 20-year power purchase agreements for renewable energy resources is often the easiest part of the process. Often companies encounter a Gordian knot of regulations, financial and legal protocols that eat up valuable work hours.

That all could change as more organizations emerge to be the “middleman” in the process, starting with the Rocky Mountain Institute’s recently launched Business Renewables Center.

“The objective is to almost double the renewable energy capacity in the U.S.,” said RMI’s Lily Donge, who helms the organization, in an interview with EnergyWire. “[The Business Renewables Center] is going to lift the market barriers so transactions are easier and faster to complete.”

Corporate power purchase agreements could achieve that goal as another path to boosting renewable energy’s grid presence, according to an RMI blog post.

“If you’re just reading the 2015 headlines it can seem as though corporations are surging into that market. The first months of the year have seen a number of impressively large renewable-energy power purchase agreements (PPAs) signed by major corporations,” the report states.

In the first quarter of 2015, 1.2 gigawatts of renewable energy — wind and solar — was signed off on by corporate PPAs, said Jacqueline Lilinshtein of Bloomberg New Energy Finance. Large-scale rooftop solar projects were included in that number, she added in an email to EnergyWire.

RMI formed the center with the help of three other nongovernmental organizations (NGOs) — the World Wildlife Fund, the World Resources Institute and Business for Social Responsibility — as part of a bigger bid to lend a helping hand to companies wanting to go green, Donge said in an email to EnergyWire.

Two obstacles that companies often face are scarce and opaque information about the hard economics and deal structure as well as information on how to close transactions, Donge said. Structuring the transaction is also difficult, Donge added.

Bill DeGrandis, a partner in the Paul Hastings law firm, has more than 30 years under his belt navigating energy regulations and transactions, including assisting companies with power sales in renewable energy.

“I think there is a trend of corporations who are trying to be more green,” DeGrandis noted. He outlined three ways corporations seek to meet their renewable energy goals, with solar and wind the most popular choice.

3 ways to go green

Corporations can go green through leasing, on-site energy sources or off-site through PPAs, both physical and virtual. Leasing and on-site renewable energy are solid choices, DeGrandis said, but “suppose the corporation doesn’t want to buy its own solar panels. It wants to buy energy somewhere else.”

Then, the corporation, based on state location, must navigate the regulations guiding how companies access their energy directly, he said. This determines whether a company can buy a stake into a wind or solar farm physically located near its location or look elsewhere.

If not, DeGrandis added, corporations often turn to “virtual PPAs.”

“You choose your own supplier in states with retail access,” DeGrandis said. “Consumers can buy electricity from whomever offers it. But in states without that retail access, corporations can’t just go to a solar plant and buy retail energy from the entity. So what do they do in that situation?”

Companies in states without retail access instead shell out cash for a renewable energy source across state lines or located nearby, often using what DeGrandis termed “contract of difference.”

“It’s a financial hedge,” DeGrandis said. “We’re going to agree on a fixed market price. If my rate goes over that level, you pay me the difference; if it’s under, I pay you for a difference. Why is it virtual? I’m not actually getting electrons from that facility. Why do that?”

Without the “contract of difference,” wind facilities and solar farms might not take off.

“The wind facility couldn’t exist without the contract of difference, and the corporation says, ‘Look, I can build a wind facility,'” DeGrandis said, and it can add “green” to its brand.

Another element that could hamstring corporations looking to go green is wholesale deregulation, said RMI’s Donge.

It’s different from retail in that wholesale is composed of electricity sold on the market by power suppliers independent of utilities. Donge added that “different states have greater or lesser levels of wholesale deregulation and of retail competition.”

RMI’s Business Renewables Center focuses on areas under wholesale deregulation that is not broken out by state, but by utility, Donge said.

To double or not to double

Donge said fewer than two dozen Fortune 500 companies have signed off-site PPAs.

“Corporate renewable energy procurement is significant — it totaled about 1 GW last year — but it could and should be much larger,” the RMI April blog post read.

The center hopes to fashion solutions to smooth the way for corporate PPAs — for example, by creating case studies outlining what other companies have done.

“Very specifically, we create the knowledge that’s needed for the market,” Donge said. “We interview companies that have done this before so new companies don’t reinvent the wheel; write case studies and put out primers to address some of the really high barriers like accounting.”

DeGrandis and David Burton, a lawyer with experience dealing with renewable energy transactions in the Akin Gump Strauss Hauer & Feld LLP law firm, acknowledge the shortfall of information for corporations going green. Degrandis, however, is a little ambivalent about the role of RMI’s Business Renewable Center for future transactions.

“I think there have always been, quote, middlemen — maybe marketers, agents, operates as a consult — it’s just gotten popular as more companies look at these options,” DeGrandis said.

However, “these corporations have no energy background beyond paying the power bill every month. Energy is not their business; they need someone like a middleman to come in and help them through this process. They just need to understand what the middleman and incentives [are] and what they are getting out of the deal.”

Burton said the hours spent on untangling processes to secure a PPA nibble away at time that could be spent improving business.

“It really is a role for RMI on the business side; [it can] answer questions on how companies solve problems — make it so the company doesn’t have to reinvent the wheel by itself,” Burton added.

Future solutions

This week, the center held a workshop in San Francisco aimed at introducing corporations, lawyers experienced in renewable energy transactions and other players to one another.

According to a blog post released Monday morning, 75 corporations, NGOs and other stakeholders converged for the workshops, showing interest in their endeavors.

But the center can’t count any victories yet, at least not directly, Donge said. One sign “depends on how many transactions we make viable; the proof is in the pudding of how many MW we get online. That’s the tricky part. So if there’s a way we’ve added value … I’d like to think we’ve indirectly helped these transactions by lifting the knowledge level.”

She added that in order to claim a complete victory, “we have to be there since inception; right now, these deals take time.”