CORPORATE RENEWABLE ENERGY PROCUREMENT: Key Trends, Practices and Collaborations

Transcription

1 CEF Special Executive Briefing December 2014 CORPORATE RENEWABLE ENERGY PROCUREMENT: Key Trends, Practices and Collaborations Prepared By: Ram Nidumolu, Devon Edwards, P.J. Simmons 1. Executive Summary Findings From CEF Survey of RE Procurement Overall Analysis Differences by Industry Sector Differences by RE Share of Total Energy ("Leaders" v "Others") Collaborative Efforts on RE Procurement Which Collaborative Efforts are CEF Members Participating In? ANNEX A: Key Collaborative Efforts in Corp RE Procurement Energy Buyer s Principles (WWF/WRI) Business Renewables Center (RMI/WWF) RE 100 Initiative (The Climate Group with CDP) Future of Internet Power (BSR) EPA s Green Power Partnership Initiative. 20 ANNEX B: Top RE Procurement Barriers and Solutions ANNEX C: Notable Examples in Corporate RE Procurement ANNEX D: Notable Resources & Documents... 26

2 1. Executive Summary This executive briefing summarizes current trends, strategies and practices of a diverse set of large companies ($1B+ annual revenues) relating to their global renewable energy procurement. Findings are based on (1) a confidential, in- depth survey of 23 CEF member companies representing a dozen industries with combined annual revenues of over $1 Trillion; and (2) interviews with selected executives and NGO experts. Given the speed with which the RE market is evolving, this briefing is a work- in- progress and findings are preliminary in nature. Key findings: Corporate renewable energy (RE) procurement is gathering momentum in enterprises as RE becomes more affordable. Yet many policy, market and internal barriers persist that are preventing more companies from increasing the share of RE in their total energy mix. The top motivations for RE procurement are: (1) to mitigate corporate impact on climate change; (2) demonstrate corporate leadership and innovation; (3) reduce costs of energy procurement; (4) diversify energy supply; (5) hedge against energy price volatility; (6) meet demand of investors & customers; (7) build resilient energy systems that can sustain operations during blackouts. In roughly half of companies, C- level/group Heads are ultimately responsible for setting RE procurement targets, defining payback criteria, and approving investments in RE projects. Wind energy is currently the dominant source in companies RE mix, followed by biomass/biogas/biofuels, then solar PV and hydro. Companies report shortest payback periods for biomass/biogas/biofuels (2.8 years), followed by wind, hydro and fuel cells (7-8 years), and solar PV and geothermal (10-11 years). Renewable Energy Certificates (RECs) unbundled and bundled continue to be the most important financial instrument used, representing about 50% of all RE procurement. Direct investments and third party PPAs account for the rest. Utility- offered PPAs are hardly used by enterprises. The most widely implemented practices for enabling RE are: (1) to publicly disclose RE procurement vs. total energy consumed; (2) to build up internal expertise enterprise- wide to complete large RE transactions; (3) to link RE procurement to science- based targets; and (4) to use RE access as a key parameter for siting or expanding facilities. Notable differences in RE procurement practices by industry sector include: o Electricity accounts for much of RE use in the IT and Other Services sectors (including banking, healthcare, logistics, media and other service industries), whereas RE for heat is more important in Heavy Manufacturing and Consumer Products. o Wind energy is by far the most dominant RE source in the IT sector and accounts for almost half the RE procured in Other Services. Biomass/biogas/biofuels are dominant in Consumer Products and Heavy Manufacturing. o IT and Other Services sectors rely heavily on bundled and unbundled RECs. Companies in the Heavy Manufacturing and Consumer Products sectors are much more likely to directly invest in RE production and use more 3 rd party PPAs than others. Companies whose RE share of total energy exceeds 30% have different practices than those using <30%: o More likely to come from the IT, Information and Other Services sectors. o 4-5 times more likely to set RE procurement targets. o Use more wind and hydro. o Depend twice as much on bundled and unbundled RECs to drive RE procurement targets. o Higher level of executive decision making when it comes to setting GHG emissions targets (which often drive RE), defining the mix of RE sources, and approving investments. o Face more demand from investors and customers. o More motivated to demonstrate corporate leadership and innovation, and to lock in price stability. o More apt to use access to RE as a key decision parameter for siting or expanding new facilities. Several important NGO- private sector collaborative initiatives have formed to identify and tackle key barriers. Among them, CEF members are most aware of the WWF/WRI RE Buyer s Principles. Notably, WWF, WRI, BSR, RMI, Climate Group and CDP are working to promote collaboration and complementarity among their respective efforts. 2

3 2.1 Overall Analysis Survey Participation 2. Findings From CEF Survey of RE Procurement Findings below are based on a confidential survey of CEF member companies conducted in Oct- Nov 2014 with participation of 23 completed responses representing a dozen industries. Participating companies together have combined revenues of over $1 Trillion, 1/16 th of the GDP of the US. Over half the revenues of responding companies come from manufacturing, represented by heavy manufacturing and consumer products, while the other half come from the IT and services. Heavy Manufacturing 22% Response by Sector (Number of Companies = 23) IT & Informalon Services 35% Consumer Producs 22% Other Services 21% The highest participation came from the IT and Information Services sector. Other Services included banking, healthcare, logistics, media and other service industries, which also have significant physical infrastructure such as buildings and facilities. 3

4 Motivation for Committing to RE Procurement 5 Mo^va^ons for RE Procurement Commitments Importance of Mo^va^on (1 - Not At All, 2 - A Li`le, 3 - Somewhat, 4 - Important, 5 - Cri^cal) Demonstrate Corporate Leadership, Innovalon Milgate Corporate Impact on Climate Change Reduce Costs of Meet demand Diversity energy Energy supply Procurement from investors & customers to increase RE in energy mix Lock in long- term price stability to hedge against energy price volallity The top motivations for RE procurement in order of importance are: o Mitigate corporate impact on climate change ( important ) o Demonstrate corporate leadership and innovation ( somewhat important to important ) o Reduce costs of energy procurement ( somewhat important to important ) o Diversify energy supply ( somewhat important ) o Lock in long- term price stability ( somewhat important ) o Meet demand from investors and customers ( somewhat important ) Post- survey conversations with individual members revealed another motivation that should have been on our original list: Build resilient energy systems that can sustain operations during blackouts. 4

5 GHG and Carbon- Related Drivers Carbon- Related Drivers of RE Procurement Percentage of Respondents 60% 50% 40% 30% 20% 10% 0% Not Driven Somewhat Driven Directly Driven Extent to Which RE Procurement is Driven by Carbon GHG/Carbon Footprint Targets Carbon Neutral Targets GHG/carbon footprint reduction targets are driving RE procurement at over half the companies surveyed Corporate carbon neutral targets are driving RE procurement at 20% of companies 5

6 Corporate Decision Making for RE Procurement Corporate Decision Maker for RE Procurement Decisions Board CEO C- Level/Group Heads VPs/Regional Heads Localon/Plant Managers 0% 0% 9% 5% 0% 0% 45% 38% 48% 43% 48% 81% 38% 45% 26% 52% 52% 5% 5% Semng RE Procurement Targets 14% 9% 10% 9% 14% 0% 0% Semng GHG Semng Energy Defining RE Emissions Targets Efficiency Targets Procurement Mix Defining Payback Criteria for RE Projects 4% 0% Approving Investments in RE Projects In roughly half of companies, C- level/group Heads are ultimately responsible for setting RE procurement targets, defining payback criteria, and approving investments in RE projects. VPs/Regional heads are responsible at most of the other half. In over 80% of companies, VPs/Regional Heads decide the actual mix of RE procurement. In 18-25% of companies, the Board and the CEO are ultimately responsible for setting GHG and energy efficiency targets, while only 10% are responsible for setting RE procurement targets. RE procurement is less prominent at Board/CEO levels than GHG emissions and energy efficiency. 6

7 RE Procurement by Type of RE Source 50% Share of RE Procured by Source (Average Across All Companies) % SHARE OF TOTAL RE PROCURED 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Solar PV Wind Hydro Biomass Fuel Cells Geothermal Others RE Source 12% 44% 11% 25% 3% 4% 2% Renewable energy from Wind dominates the RE source mix for companies, followed by Biomass/biogas/biofuels. Solar PV and Hydro represent the 3 rd and 4 th most widely used RE sources. 7

8 Payback Periods from RE Sources 12.0 Average Payback Period by RE Source Payback Period (Years) Solar PV Wind Hydro Biomass Fuel Cells Geothermal RE Source Biomass/biogas/biofuels have the shortest payback periods (2.8 years) of all types of RE sources, which make them very attractive for industries that can use them. Wind, hydro and fuel cells have average payback periods of 7-8 years, which make them the next most attractive investment. Solar PV and Geothermal have payback periods of around 10 years. 8

9 RE Procurement by Type of Purchase % SHARE OF TOTAL RE PROCURED 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Unbundled RECs Share of RE Procurement By Financing Type (Average Across All Companies) Bundled RECs Direct Investment Ullity PPAs Third Party PPAs Others RE Financing 24.8% 24.5% 27.3% 0.4% 22.1% 1.0% Renewable Energy Certificates (RECs) unbundled and bundled continue to be the most important financial instrument, representing around 50% of all RE procurement. Direct investments and third party PPAs account for the rest. Utility- offered PPAs are not yet being used as a financing option. 9

10 Emerging RE Procurement Practices Corporate Use of Emerging RE Procurement Prac^ces Not Explored Implemented in a Few Cases In Exploralon Stage Implemented Widely 9% 9% 13% 13% 4% 78% 26% 22% 17% 26% 9% 22% 43% 26% 39% 13% 52% 43% 43% 35% 43% 48% 57% 13% 9% 17% 22% 22% 26% Publicly disclosed RE procurement vs. total energy consumed Built up internal exper^se to complete large RE transac^ons Used virtual PPAs to source RE offsite Linked RE procurement to science- based GHG emissions targets Worked Considered Used RE access collabora^vely u^lity- offered as a key with u^li^es to RE tariffs procure RE parameter for si^ng or expanding facili^es Invested in offsite RE projects as a tax equity investor Key Practices in order of use: 1. Publicly disclosing RE procurement vs. total energy consumed (78% widely; 13% in a few cases ) 2. Building up internal expertise enterprise- wide to complete large RE procurement transactions (26% widely; 22% in a few cases ; 35% exploring) 3. Linking procurement to science- based targets (26% widely; 9% in a few cases ; 43% exploring) 4. Using RE as a key parameter in siting or expanding facilities (13% widely; 26% in a few cases ; 13% exploring) 5. Using virtual PPAs (9% widely; 17% in a few cases ; 52% exploring) 6. Working collaboratively with utilities to procure RE (9% widely; 22% in a few cases ; 43% exploring) 7. Investing in offsite RE projects as a tax equity investor (4% widely; 39% exploring) 8. Considering utility- offered RE tariffs (13% in a few cases ; 43% exploring) 10

11 2.2 Differences by Industry Sector Corporate RE procurement is heavily affected by the company s particular industry sector, as shown below. Differences in RE Use by Sector Differences in RE Use by Sector Electricity Heat HV fuels LV fuels 1% 1% 36% 41% 13% 4% 63% 59% 98% 84% Consumer Products Heavy Manufacturing IT and Informalon Services Other Services Electricity accounts for much of RE use in IT and Information Services, and Other Services, Heat becomes important in Heavy Manufacturing and Consumer Products, given plants/factories. RE fuels for heavy vehicles is more prominent in Other Services, where logistics is important. Electricity Procurement for U.S. Operations: Regulated v. Unregulated Markets % of Procurement Electricity Procurement in U.S. Regulated v. Unregulated Markets 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Consumer Products Heavy Manufacturing IT and Informalon Services Other Services Regulated Markets 60% 79% 40% 50% Unregulated Markets 40% 21% 60% 50% 11

12 Regulated markets dominate electricity procurement in Heavy Manufacturing and Consumer Products. Unregulated markets dominate the IT and Information Services sector. This may be because IT companies have specifically chosen to site datacenters where they can be powered by RE. RE Financing Models % of RE Procurement 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Consumer Products RE Financing by Sector Heavy Manufacturing IT and Informalon Services Other Services Others 2% 0% 1% 0% 3rd Party PPAs 48% 34% 4% 8% Ullity PPAs 0% 0% 1% 0% Direct Investments 48% 46% 0% 33% Bundled RECs 0% 0% 64% 0% Unbundled RECs 2% 19% 30% 59% Bundled RECs dominate in the IT and Information Services sector, followed by unbundled RECs. Unbundled RECs dominate in Other Services, followed by direct investments. Direct RE investments dominate in Heavy Manufacturing, followed by 3 rd party PPAs. In the Consumer Products sector, both direct investments and 3 rd party PPAs are equally popular. The sectors vary considerably in their preference for different kinds of RE financing models, given that the value of the model depends on the kinds of business operations that are involved. 12

13 RE Source by Sector RE Sources By Sector % of RE Procurement 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Consumer Products Heavy Manufacturing IT and Informalon Services Other Services Others 0% 2% 4% 0% Geothermal 5% 13% 0% 0% Fuel Cells 2% 0% 0% 15% Biogas/Biofuels/Biomass 40% 49% 5% 17% Hydro 6% 11% 13% 13% Wind 13% 20% 77% 46% Concentrated Solar 0% 0% 0% 0% Solar PV 32% 11% 1% 9% Wind energy is by far the most dominant RE source in the IT and Information Services sector and accounts for almost half the RE procured in Other Services. Biomass/biogas/biofuels are dominant in Consumer Products and Heavy Manufacturing, perhaps because of their utility in manufacturing plants/factories. Solar PV is used much less as a percentage of overall RE consumption in the IT and Information Services sector than in Consumer Products and Heavy Manufacturing and Other Services. Consumer Products and Heavy Manufacturing companies report a more balanced portfolio of RE sources when compared with Other Services, and especially with IT and Information Services. 13

14 2.3 Differences by RE Share of Total Energy: Leaders v Others How do companies striving to be leaders in RE procurement differ from others when it comes to RE procurement mix, strategies and practices? To answer this question, we grouped the companies into two categories: Leaders whose have a RE share of total energy mix (RE Mix) greater than 30%, and Others who don t. We then compared these two groups as follows. RE Procurement Target Setting RE Procurement Targets RE Mix > 30% Others 83% 78% 18% 19% % of Group that has set targets Average RE Mix % target set 25% of survey respondents are RE Mix Leaders (i.e., companies with RE share of total energy mix over 30%). RE Mix Leaders are 4-5 times more likely to have set RE procurement targets than Other companies. RE Mix Leaders tend to set very aggressive procurement targets: on average, Leaders set a target of making RE 78% of their total energy mix. 14

15 Leaders v Others: RE Procurement Financing Model RE Procurement Mix By Financing Model 100% 90% % of Total RE Procurement 80% 70% 60% 50% 40% 30% 20% 10% 0% RE Mix > 30% Others Others 2% 1% 3rd Party PPAs 15% 25% Ullity PPAs 0% 1% Direct investment 7% 35% Bundled RECs 37% 19% Unbundled RECs 39% 19% RE Mix leaders depend twice as much on bundled and unbundled RECs to drive RE procurement targets as others (76% vs. 38%). Other companies depend almost three times as much on direct investments and 3 rd party PPAs as RE Mix leaders (60% vs. 22%). Utility- offered PPAs are virtually nonexistent in their use. This major difference in financing models between RE Mix leaders and others is because the former are largely from the IT & information Services and Other Services sectors, where similar differences in financing models are present. 15

16 Leaders v Others: RE Procurement Sources RE Procurement Mix By Type of RE Source 100% 90% % of Total RE Procurement 80% 70% 60% 50% 40% 30% 20% 10% 0% RE Mix > 30% Others Others 6% 1% Geothermal 4% 4% Fuel Cells 0% 4% Biogas/Biofuels/Biomass 7% 33% Hydro 12% 11% Wind 70% 33% Concentrated Solar 0% 0% Solar PV 1% 16% RE Mix leaders depend almost twice as much on Wind and Hydro sources as others (82% vs. 44%). On the other hand, they depend much less on Solar PV compared to others (1% vs. 16%). RE Mix leaders depend much less on biomass/biogas/biofuels for renewable energy than others (7% vs. 33%). As before, this is because they mainly come from the IT and Information Services and Other Services sectors, where the use of these sources is much less than in the Heavy Manufacturing and Consumer Products sectors. Hydro and geothermal sources are almost equally relied upon by RE Mix leaders and others. 16

17 Leaders v Others: Motivations for RE Commitment If RE Mix leaders assign a higher level of decision- making on RE procurement than others (at least in key areas such as approving RE investments), is it because their motivations for RE procurement are different from the others? Blue line = Leaders Red line = Others Importance of Mo^va^on (1 - Not At All, 2 - A Li`le, 3 - Soemwhat, 4 - Important, 5 - Cri^cal Demonstrate corporate leadership, innova^on & first- mover advantage Leaders' v Others' Mo^va^ons Mi^gate corporate impact on climate change Reduce costs of Meet demand energy procurement from investors and customers to increase RE in the energy mix Diversify energy supply Lock- in long- term energy price stability to hedge against vola^lity Mitigating corporate impact on climate change and reducing the costs of energy procurement are equally motivating reasons for both RE Mix leaders and others. RE Mix leaders assign a higher level of importance than others to all other motivating reasons. The area where RE Mix leaders most differ from others is in meeting demand from investors and customers to increase RE in their energy mix, followed by the motivation of demonstrating corporate leadership and innovation, and locking in long- term energy price stability. This may again be because RE Mix leaders are largely from the IT and Information Services and Other Services sectors, where markets, customers and investors give much more importance to renewable energy than other sectors. 17

18 Leaders v Others: Adoption of Emerging RE Procurement Practices Do RE Mix leaders differ from others in the extent to which they have adopted emerging RE procurement practices? To understand this difference, we compared the RE Mix leaders with others on these practices. Blue line = Leaders Red line = Others Adop^on of Emerging RE Procurement Prac^ces Extent of Adop^on (1 - Not Expored, 2 - In Explora^on Stage, 3 - Implemented A Few Cases, 4 - Implemented Widely) RE Mix leaders and others are essentially similar in adopting practices that link RE procurement to GHG emissions reductions that are recommended by scientists, i.e., science- based targets. On average, they are in the exploration stage of these practices. In every other emerging practice, a typical RE Mix leader is ahead of others. The difference is especially significant in using access to RE as a key decision parameter for siting or expanding new facilities. Most companies have widely implemented the public disclosure of their RE procurement compared to their total energy consumption. 18

19 3. Collaborative Efforts on RE Procurement 3.1 Which Collaborative Efforts are CEF Members Participating In? Prior to conducing the survey, we identified four major NGO- led collaborative initiatives to raise awareness about opportunities, reduce complexity, and expand access to affordable renewable options. We asked survey respondents about their knowledge of/participation in the following: 1. RE Buyer s Principles (WWF/WRI) 2. Business Renewables Center (RMI/WWF) 3. RE100 Initiative (Climate Group/CDP) 4. Future of Internet Power Initiative (BSR) CEF Members' Involvement in RE Collabora^ve Ini^a^ves Unaware Keeping Informed Par^cipant A Key Driver 9% 9% 18% 9% 0% 5% 5% 9% 36% 59% 64% 77% 50% 14% 18% 18% WWF/WRI RE Buyer's Principles RMI/WWF Business Renewables Center CDP/Climate Group's RE100 Ini^a^ve BSR's Future of Internet Power Ini^a^ve 1. CEF members are most familiar with the WWF/WRI RE Buyer s Principles and least familiar with BSR s Future of Internet Power initiative. 2. Most members are monitoring (rather than participating in) the Buyer s Principles, Business Renewables Center and RE100 initiatives. 19

20 ANNEX A: Key Collaborative Efforts in Corp RE Procurement Several important NGO- private sector collaborative initiatives have formed to identify and tackle key barriers. Notably, WWF, WRI, BSR, RMI, Climate Group and CDP are working to promote collaboration and complementarity among their respective efforts. 1. Energy Buyer s Principles (WWF/WRI) The Renewable Energy Buyer s Principles, in partnership with participating companies, was created to frame the challenges most commonly encountered in corporate energy purchasing scenarios. The bilateral initiative provides 6 principles that are conceived to be most important to increasing access to renewable energy. Participating companies currently include 3M, Adobe, Bloomberg, Cisco, ebay, EMC2, Facebook, Hewlett- Packard, Intel, Johnson & Johnson, General Motors, Mars, Novelis, Novo Nordisk, Procter & Gamble, REI, Sprint, Volvo, and Walmart Business Renewables Center (RMI/WWF) The Business Renewables Center (BRC) was created to accelerate the adoption of corporate off- site renewable energy purchasing. The BRC provides three services that help companies overcome obstacles: strategic guidance for contracts and gaining internal approval, bridging connections and access to experts, and identifying market opportunities RE 100 Initiative (The Climate Group with CDP) The RE100 initiative was created to encourage at least 100 major companies to commit to 100% renewable energy by The initiative supports companies by helping to identify best practices for RE implementation, financial implications associated with transitions, and risks and rewards of options. Founding partners are Ikea and Swiss Re. Participating companies include BT Group, Commerzbank, Formula E, H&M, KPN, Mars, Nestlé, Philips, Reed Elsevier, J. Safra Sarasin, Yoox Future of Internet Power (BSR) The Future of Internet Power initiative is comprised of technology companies that are interested in advancing low- carbon, sustainable power for data centers. The initiative enables businesses to share best practices, collaborate with select utilities and policymakers, and develop a platform that drives growth in the renewable energy sector. Participating companies include Adobe, ebay, Facebook, Hewlett- Packard, Salesforce.com, and Symantec EPA s Green Power Partnership Initiative The EPA Green Power Partnership is a platform that provides expert advice, tools, and resources for organizations seeking to diversify their energy mix with green power products such as renewable energy credits, green pricing programs, and on- site generation. Click here for a list of participating Fortune 500 companies. 20

21 ANNEX B: Top RE Procurement Barriers and Solutions: Summary of Key Research Below are summaries of findings from several prominent efforts on key barriers to renewable energy procurement and possible solutions. Guide to Purchasing Green Power (CRS, EPA, U.S. Department of Energy, and WRI) The Center for Resource Solutions, EPA, U.S. Department of Energy, and World Resource Institute partnered to create a roadmap for businesses that want to integrate green power to diversify the energy mix. The most common barriers to wider investment and greater deployment of low- carbon technologies include: Cost of the technology. o Solutions: Seek a fixed- priced contract Buy green power for only part of the organization s electricity use. Make a longer- term purchase. Use a contract for difference: A contract for difference (CFD) is a financial agreement that allows renewable power suppliers and purchasers to lock in stable power prices and revenues by agreeing to pay the difference between the actual power price and an agreed- upon benchmark or strike price. Offset the cost with savings from energy efficiency Use Savings from competitive choices Specify a price cap or maximum total budget Insufficient financial performance. o Solution: Perform an analysis that compares the cost- effectiveness of the organization s current electricity supply versus a renewable power system. This analysis should use the financial assessment methods that your company would normally use for any capital investment: life- cycle cost, rate of return, and net present value. Availability of financing capital. o Solution: Take advantage of the financial incentives that many states offer specifically for customers that install qualified renewable power generation systems. These incentives include, but are not limited to direct payments (rebates), competitive solicitations, consumer financing, or lower taxes (either sales or property tax exemptions). The federal government provides additional avenues for financing including an investment tax credit for solar and geothermal energy systems. Lack of staff capacity and knowledge. o Solution: Include energy news in internal publications: Introduce internal publications, such as newsletters, to communicate advancements in renewable energy procurement and other information to your employees, stakeholders, and affiliates. Keeping your company well informed can also help support the organization s mission, growth, and development. Establish a staff adoption and recognition program: Create incentives, provide information, set milestones for staff purchases over time, and recognize individual 21

22 achievements. Inadequate baseline energy data against which to demonstrate improved performance. o Solution: Analyze consumption data from the previous year prior to specifying company requirements. This enables a company to have an accurate picture of its energy use. Lack of a streamlined decision- making process. o Solution: Companies should consider seeking outside experts who can help with the technical and financial aspects of a renewable power project. Technical assistance providers include the local utility, the state energy office, energy service providers, energy service companies, consultants, manufacturers, and equipment vendors. Full document: Expanding Renewable Energy Options for Companies Through Utility- Offered Renewable Energy Tariffs (Google) Google discusses practices that are commonly used by companies when procuring renewable energy including on- site generation, renewable energy certificates, and power purchase agreements. The white paper addresses the possible widespread adoption of renewable energy tariffs, a service that enables companies to purchase renewable energy directly from their utility. Challenges to procuring renewable power: 1. On Site Generation: On- site systems typically do not produce sufficient electricity to power large facilities 24/7 and must be supplemented with power from the local utility provider. 2. Renewable energy certificates: Purchasing and retiring RECs to cover electricity usage does not provide assurance that the price paid for RECs is being used to advance renewable power generation. In addition, companies cannot request and procure renewables directly from the local utility in a transparent and straightforward manner, where they know how much renewable power they are getting (and from where ). 3. Power Purchase Agreements: PPAs require Google to actively manage purchases and sales of power on the wholesale energy markets, which can be a complex process. Utilities and the state commissions that regulate them do not provide a way for large users to request renewable power. Proposed solution for all 3 challenges: a renewable energy tariff, which offers several advantages: 1. Utilities can do what they do best build power plants, procure power, manage the grid, and deliver electricity to customers. 2. Utilities are enabled to employ multiple power sources to better manage the variability associated with renewables. 3. Transaction costs are lowered through offering a generally applicable service to a wider group of customers. 4. They have the potential to stimulate economic development as companies choose to locate or expand in markets that offer more renewable energy options. 5. Utilities will improve customer satisfaction by providing new services that are responsive to customers needs. 6. Since companies will have the option of buying renewable power, it can lead to greater investment in local and regional renewable energy projects. This can provide jobs and opportunity in a utility s service area and ultimately reduce the cost of renewable energy for everyone. Source: energy- options.pdf 22

23 Related: See WRI paper on Green Tariff Design : tariff- design Power Forward 2.0 (Calvert Instruments, Ceres, DG & A and WWF) Calvert Investments, Ceres, David Gardiner & Associates, and the World Wildlife Fund reports that 53 Fortune 100 companies are collectively saving $1.1 billion per year by setting renewable energy and greenhouse gas emissions goals. Challenge: Cumulative efforts still fall short of meeting the challenge of climate change, and energy. Solutions: Establish a timeline for renewable energy, energy efficiency, or GHG emissions reduction commitments. Include specific renewable energy and energy efficiency targets. At the very least, ensure that both are part of a GHG reduction strategy. Ensure that your company is transparent in reporting GHG commitments and the role that renewable energy should play in meeting them. In addition, use emerging global standards for Scope 2 carbon accounting. Identify opportunities to support local, state, and national policies that remove barriers to scale up renewable energy, deploy energy efficiency, and enable companies to achieve their climate commitments. Challenge: Corporate renewable energy adoption is both a significant threat and a promising opportunity for utilities. Whether utilities benefit or are negatively affected by corporate efforts will depend on the electric sector s response. Solution: Implement green tariffs that enable commercial and industrial customers to purchase electricity directly from the utility. Challenge: Inconsistent renewable energy policies that create uncertainty on the price, supply, and deployment of renewable energy. Solution: Federal policymakers need to support the Production Tax Credit for wind and Investment Tax Credit for solar. Challenges for large corporate buyers of renewable energy: 1. Internal challenges, including knowledge, capacity, and management support: Solution: Renewable energy developers, suppliers, and buyers can collaborate to make information and resources easier to access and understand. This enables company management to become informed on the benefits of investing in renewable energy. 2. Market challenges that lead to high transaction costs: Solution: Develop a shorter- term or transferable contract that offers more flexibility. 3. Limits on what they can do and how they can do it created by laws, utility regulators, utility practices, and accounting standards. Solution: Companies can work collaboratively with their utilities to procure the renewable energy they need to meet their targets without having to build substantial energy procurement expertise internally. Source: forward how- american- companies- are- setting- clean- energy- targets- and- capturing- greater- business- value 23

24 ANNEX C: Notable Examples in Corporate RE Procurement ** See also Annex A: Key Collaborative Efforts in Corp RE Procurement Apple is close to its goal of powering all its facilities 100% by renewable energy apple/ Duke Energy opens the door for large renewable energy purchasers Duke Energy was granted approval by the North Carolina Utilities Commission to sell renewable energy directly to large, commercial customers under a 3- year pilot program called the Green Source Rider. The program enables large companies to procure renewable energy in a transparent manner that meets the increasing demand for renewable power. This offering supports Google s idea of a renewable energy tariff by enabling companies to procure clean power from their utilities. energy- s- green- initiative- may- show- quick.html energy- options.pdf Facebook datacenter powered by 100% renewable energy Facebook announced that its datacenter in Altoona, Iowa uses 100% outside air for cooling the interior of the facility and 100% renewable energy for its electricity demand. The wind project selected by Facebook tracked with Renewable Energy Credits will supply 140 MW of renewable energy into the local grid, which is more than the datacenter currently requires. altoona- data- center- is- now- online/ Ford partners with Wind Energy Corporation Ford will invest $750,000 to install wind sail and solar panel systems at 4 Ford dealerships, in partnership with the Wind Energy Corporation. The 20,000 kw- h of electricity generated annually will help power dealership facilities, electric vehicle charging stations, and lot lighting. pilot- program- with- wind- energy- corporation- brings- clea.html Google Renewable Energy Options energy- options.pdf Google Green PPAs Google pledged to become carbon neutral and increased its activity in Green Power Purchase Agreements (PPA) programs in order to supply carbon- free renewable power to its data centers. The company ensures that its PPAs supply clean energy to the desired grid by agreeing to contracts in the same market areas as their datacenters. Once the electricity is generated, Google sells the power back to the local grid at the wholesale price current transactions result in a net loss for the company, but that is expected to change as the demand for power rises in the future. As a result, Google acquires RECs that are allocated to the electricity consumption in their datacenters a process that designates the facility s power consumption as carbon free. able- energy.pdf Mars buys RECs from Sumitomo Corporation Wind Farm Mars purchased all of the renewable energy certificates (RECs) from Sumitomo Corporation s 200 MW Texas wind farm, which is expected to come online in The RECs will cover 100% of Mars U.S. 24

25 energy needs. center/press- list/news- releases.aspx?siteid=94&id=5629 Microsoft fuels datacenter with Biogas FuelCell Energy opened a "zero- carbon" fuel cell power plant in Wyoming that is powered by renewable biogas from a wastewater treatment facility. The fuel cell plant supplies electricity to a nearby Microsoft datacenter, as well as heat to the wastewater treatment facility. Solar employee engagement program The World Wildlife Fund and Geostellar launched a new program that enables U.S. employees from 3M, Cisco, Kimberly- Clark, and the National Geographic Society to purchase discounted home solar PV systems. Employees will reportedly be able to purchase solar power at a 35% discount below average prices in the United States. releases/first- nationwide- bulk- purchase- program- will- expand- access- to- clean- solar- energy Unilever and NRG Energy Unilever is working with NRG Energy to ensure that 100% of its U.S. energy needs are met through clean and renewable sources by Unilever already purchases renewable energy certificates to cover 100% of its U.S. electricity consumption, but will transition to direct renewable energy generation with the help of NRG. center/pressreleases/2014/nrg- Unilever- Form- Strategic- Partnership- Renewable- Energy.aspx Walmart s Approach to Renewable Energy Walmart released a report outlining its aspiration to derive 100% of its power from renewable sources. The company s RE methodology involves three core objectives: developing and installing scalable RE projects; driving down the cost of RE; and establishing RE pricing that is either comparable or more cost effective than current utility prices. approach- to- renewable- energy.pdf Walmart s aims to power operations with 100% renewable energy Walmart released a report outlining its goal to derive 100% of its power from renewable sources. The company s RE methodology involves three core objectives: developing and installing scalable RE projects; driving down the cost of RE; and establishing RE pricing that is either comparable or more cost effective than current utility prices. In addition to this focus, Walmart identified the nine conditions it considers when procuring RE: availability of renewable resources that maintain the efficiency and operating potential of power systems; stable technologies and providers; finance capital availability; government incentives; identifying current and future electricity costs; favorable regulatory framework; access to a reliable grid; building ownership is necessary when installing on- site rooftop RE; and permitting and regulatory freedom. approach- to- renewable- energy.pdf Walmart renews agreement with SolarCity SolarCity and Walmart have announced in December 2014 a new 4- year agreement to build on a collaboration that began in 2010 and has since yielded over 200 solar projects at Walmart sites. and- walmart- renew- solar- partnership 25

26 ANNEX D: Notable Resources & Documents Guide to purchasing Green Power (EPA, Center for Resource Solutions, WRI) Power Forward 2.0: How American Companies are Setting Clean Energy Targets and Capturing Greater Business Value forward how- american- companies- are- setting- clean- energy- targets- and- capturing- greater- business- value The Return (and Returns) of Tax Equity for US Renewable Projects (Bloomberg New Energy Finance) Analysis of advantages of various tax equity structures. The report finds that tax equity provides attractive cost benefits to RE developers a 6-19% return on wind and 13-36% return for solar depending on the structure. Financing Wind Projects with Synthetic PPAs Wind- Projects- With- Synthetic- PPAs.html With Virtual Power Purchase Agreements, Companies Go Long on Renewable Energy Understanding Renewable Energy Cost Parity Factsheet (WRI) Note: WRI will publish two more Factsheets soon Above and Beyond: Green Tariff Design for Traditional Utilities (WRI) tariff- design Medium- Term Renewable Energy Market Report (International Energy Agency) Projects that renewables will supply 26% of global electricity by 2020 up from 22% in Also predicts that the pace of new renewable capacity additions will slow after 2014 due to policy uncertainty and other market risks. Medium- Term_Renewable_Energy_Market_Report_2014 Annual Energy Eye on The Market - The Arc of History content/uploads/annual- energy- EoTM- The- Arc- of- History.pdf REthinking Energy (International Renewable Energy Agency) Analyzes major technological and financial trends that are contributing to the spread of RE worldwide. Recommends changes to infrastructure planning, policy, and education. Benchmarking Utility Clean Energy Deployment (Ceres) Ranks U.S. utilities based on their clean energy provision. The report benchmarks utilities based on 3 indicators of clean energy provision: RE sales, cumulative annual energy efficiency savings, and incremental annual energy efficiency savings. utility- clean- energy- deployment- 2014/view 26