United States

United States

Diverse businesses join US trend buying into wind

UNITED STATES: Three quarters of US purchase agreements signed in the final quarter of 2015 were with non-utility buyers, no longer confined to large businesses with power-hungry data centres.

General Motors signed a deal with EDP Renewables North America to use wind power at its Texas plant
General Motors signed a deal with EDP Renewables North America to use wind power at its Texas plant

The US market for non-utility buyers of renewables will average 4GW yearly through 2030 — and half of that will be wind power, says Hervé Touati, managing director at non-profit research organisation the Rocky Mountain Institute (RMI).

The institute, which focuses on energy and resource efficiency, connects corporate buyers with renewable energy sellers via its Business Renewable Centre (BRC), and had signed up 61 participants to its online platform in the first two months of its launch. These include household names such as Amazon, Facebook and Apple.

As well as conventional power purchase agreements (PPAs), the deals arranged through the BRC, include virtual or synthetic PPAs — a price hedge in which the corporate purchaser shoulders the risk of the merchant wind farm's power prices dropping but, in return, may take an equity stake.

There are also green-tariff deals, in which a utility allows corporate customers to source some or all of their electricity from renewable sources, or a firm can directly invest in a wind project.

A major driver is that corporations are under more pressure from shareholders and customers to act on sustainability goals. Efficiency is hard to implement quickly, so securing large offsite renewables deals makes sense, said Touati during a webinar organised by the American Wind Energy Association (AWEA).

The economics are attractive. "It just has to do with cash. It's not Democrats versus Republicans, or green versus coal. It's cash," Touati told Windpower Monthly.

"It is good for corporate America." Boosting the deals is the multi-year extension of the production tax credit and the investment tax credit, extended in late December.

According to AWEA, non-utility purchasers of wind comprised 75% of the total megawatts contracted in PPAs signed in the fourth quarter of 2015, including Google and Procter & Gamble — both BRC members — as well as automotive giant General Motors. Deals clinched so far this year include US conglomerate 3M.

From 2008 to 2014, more than 2.2GW non-utility agreements for wind were signed. In 2015 and the first two months of 2016, the trend had grown to 2.8GW, according to BRC.

As solar prices have dropped, solar is gaining ground. Only 40MW of solar was signed in 2008-2014, whereas 815MW was signed in 2015 and early 2016.

Risk transparency

Risks include damage to a company's reputation, which is minimal for wind as it is a mature technology. Grid congestion and curtailment are possible. There should be more transparency regarding the risks, said Touati.

Data centres, being especially power-hungry, had been leading the trend. But last year, the range of companies signing up broadened to include, for example, chemicals company Dow, hospital chain Kaiser Permanente, and Owens Corning, a maker of insulation, roofing, and fibreglass composites.

The diversity is expected to increase.

On the wind side, while EDF Renewable Energy leads, NextEra Energy, Invenergy, MidAmerican Energy and Apex Clean Energy also have significant involvement.

The average size of contracts has been 80-100MW, but this is expected to fall as more smaller companies get involved, said Touati.

Smaller buyers may also encourage a trend in aggregation, where a leading buyer could syndicate — or sell — the remaining smaller shares in a contract to others. Or an intermediary could buy a contract, then sell all of the shares, taking the margin.

Corporate buyers act differently from utilities, which means that new skills will be increasingly needed in the wind industry, said Touati, who is also a former global managing director of E.on's solar and biomass businesses. Non-utility buyers move faster and are not used to such long-term contacts.

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