Tax credits are shrinking. Will it stall wind and solar?

Source: David Iaconangelo, E&E News reporter • Posted: Tuesday, February 5, 2019

Corporate giants continued to lock up long-term agreements to buy renewable power last year, breaking records for new procurement, according to a series of analyses published last week.

It comes as wind and solar tax credits expire or hit their leanest points, in 2020 and 2022, respectively. Those approaching deadlines have helped create a bubble of new deals, say analysts.

But many analysts and renewable developers say that even after the credits phase down or out, corporate enthusiasm isn’t likely to wane much, helping preserve growth for the U.S. wind and solar industries.

“A lot of these companies have made commitments they need to reach over the next few years,” said Kyle Harrison, an analyst of corporate energy strategy at Bloomberg New Energy Finance.

Take the RE100group: The nearly 160 global companies making up the corporate coalition have all established a target year by which they want to buy enough renewable power to offset 100 percent of their electricity usage.

To meet the members’ goals for 2030 will require about 100 gigawatts of new solar and wind capacity to go up around the world, according to BNEF. That’s the equivalent of the United Kingdom’s entire power generating fleet in 2017.

“Those targets are going to drive a ton of demand,” said Harrison.

‘A lot of brand value’

Long-term power purchase agreements (PPAs) struck with renewable developers, which lock in a massive amount of power for a decade or two, can also keep prices predictable for companies worried about the volatility of fossil fuels.

The main advantage for most big companies, though, is the opportunity to claim responsibility for an entirely new wind or solar farm and count that toward their clean power targets.

One typical example was showcased during the Super Bowl, when Anheuser-Busch ran a television ad calling attention to what it described as its commitment to brewing Budweiser beer from 100 percent wind power.

That dates to a 2017 deal to buy over 150 megawatts from an Oklahoma wind farm developed by Enel Green Power. As in most corporate agreements, the brewer wasn’t actually buying electrons for use in making beer. Power from the Oklahoma farm feeds into the local grid, not straight to Budweiser operations.

For Super Bowl weekend, which was held in Atlanta, Anheuser-Busch also said it was “donating” the credit equivalent of the city’s weekend power use to the game’s Host Committee.

“There’s a lot of brand value [in these types of deals],” said Mark McGrail, associate vice president for energy management at Enel Green Power. “Sometimes their customers are asking for it, or their investors or even employees.”

Last year, non-utility companies signed about 22 percent of all U.S. wind and solar power agreements.

Some midsize companies, especially in the data and technology sectors, are starting to follow larger, more experienced peers into multiparty deals with developers.

But procurement remains dominated by tech giants. Just a handful of corporations accounted for about half of all corporate renewable procurements in 2018, according to a Wood MacKenzie analysis released last week. Facebook, Google and Amazon alone struck over a third of those deals.

Demand from such companies is beginning to act as a driver of solar growth, though wind remains the preferred source. In 2018, non-utility companies contracted for almost as much long-term wind power as utilities did, far surpassing the amount from any previous year, according to a report last week from the American Wind Energy Association.

In a post-subsidy landscape, said Harrison of BNEF, the prices of wind and solar power would probably go up slightly at first but continue to decline over the longer term.

Spokespeople from AWEA expressed optimism about future growth.

Celeste Wanner, a senior analyst at the association, pointed to recent comments from the CEO of NextEra Energy Inc., a leading renewable developer for corporate contracts.

The executive, Jim Robo, told investors that even without incentives, renewable generation would be cheaper than most fossil fuels and a significant source of opportunity for the company “early in the next decade.”

“We continue to believe that this will be massively disruptive to the nation’s generation fleet and create significant opportunities for renewables growth well into the next decade,” he said.