Honda makes largest automaker purchase ever of wind, solar

Source: By Blake Sobczak, E&E News reporter • Posted: Tuesday, September 24, 2019

 Honda plant. Photo credit: Honda

A Honda manufacturing plant in South Carolina. Honda

Honda Motor Co. Ltd. has announced the biggest-ever purchase of renewable energy in the auto industry, locking up 320 megawatts of wind and solar power to offset emissions at its U.S. manufacturing plants.

The multinational car company, headquartered in Japan, said the long-term arrangement with energy giant E.ON SE and an unnamed U.S. solar developer will account for 60% of its total North American electricity consumption, cutting emissions by the same percentage.

“The magnitude of this procurement — in addition to our other global power purchase agreements we’ve enacted — puts Honda very near the top of automakers globally” for the total number of megawatts secured from renewable sources, said Ryan Harty, manager for connected and environmental business development at American Honda Motor Co. Inc., in an interview.

The company has pledged to slash its total global CO2 emissions by 50% by 2050 compared with 2000 levels and has separately aimed to have electric vehicles account for two-thirds of its new car sales by 2030.

The latest deal hinges on “virtual” power purchase agreements (VPPA), so called because Honda’s facilities in Indiana, Ohio and Alabama won’t directly get electricity from E.ON’s Boiling Springs Wind Farm in Oklahoma or a 200-MW solar project planned in Texas.

Analysts say PPAs and their virtual counterparts are becoming an increasingly popular tool for large corporations to meet CO2 reduction goals. Last week, tech giant Google LLC unveiled its own slate of wind and solar agreements, bringing its worldwide renewable energy portfolio up to 5,500 MW (Greenwire, Sept. 20).

Google and other tech titans like Microsoft Corp. have “historically been the biggest buyers” of PPAs, said Kyle Harrison, an analyst for Bloomberg New Energy Finance, in an analysis last month. “But what I think is exciting is all this industry diversity now: You’re seeing food and beverage companies, consumer staples companies — we even saw Exxon Mobil sign solar and wind PPAs at the end of 2018.”

Honda competitors Ford Motor Co. and General Motors Co. have each announced similar agreements to buy a combined 800,000 megawatt-hours of renewable energy each year from Michigan utility DTE Energy. Honda estimated its wind and solar commitment would amount to over 1 million MWh annually.

“I would expect 2019 to be a record in terms of procurements through those [PPA] models,” said Michael Leschke, senior manager for certification programs at the Center for Resource Solutions, a California-based nonprofit focused on renewable energy policy. “That’s probably set to continue as more and more corporations try to showcase their environmental bona fides.”

Leschke said one potential downside to PPAs — particularly virtual ones — is their complexity. Companies with virtual agreements can keep pulling electricity from nearby power plants, including fossil fuel generators, while getting certificates for propping up renewable energy projects elsewhere on the grid.

“The main limitation is just based on the amount of expertise that it takes to negotiate one of these deals,” Leschke said. “The amount of knowledge and the amount of time it takes to get that knowledge is probably cost limiting to a lot of smaller entities.”

In Honda’s case, Harty said the company initially explored inking direct renewable energy agreements with utilities near its most power-hungry manufacturing plants but found that wasn’t always possible.

“A company like Honda — we’ve got manufacturing facilities in Ohio, Indiana and Alabama, Georgia, North Carolina, South Carolina: They’re all over the place,” he said. “Most of our large-consumption facilities are in regions where we just cannot go and get a power purchase agreement.”

He added that some facilities were able to add some on-site wind and solar power, which now accounts for about 7.3 MW, but said in a blog post that the “extremely flexible” VPPA model offered the best route for the company to reach renewable energy at scale.

“Eventually, there may be no need for VPPAs as renewable energy becomes ubiquitous,” Harty wrote.