Renewable Energy PPAs in the Financial Services Sector

February 13, 2018 Jenna Bieller

Renewable Energy PPAs in the Financial Services Sector

We are witnessing a shift in the energy buying landscape. When commercial and industrial (C&I) companies first began purchasing renewable energy, it was primarily confined to the most environmentally progressive companies. The increasingly competitive price of renewable energy is now inviting new industries to explore opportunities in the market.  Today, we are seeing an interest in clean energy procurement emerge from a variety of new industries, each with specific drivers that motivate these activities. One industry gaining traction in the space, financial services, has several unique motivators that contribute to the rising interest in renewable procurement:

Price of renewables

Financially, renewables are a good investment. It makes sense, then, why financial institutions are getting more actively involved in large-scale renewable energy purchasing. Renewables are now competitive with, if not cheaper than, conventional sources of energy generation in many global markets.  Signing a long-term renewable energy power purchase agreement (PPA) allows these companies to lock in competitive prices for the future, when energy prices are projected to be higher.

Based on the predicted rising cost of power, locking in long-term power prices via a PPA allows customers the opportunity to save (or even make) money in the future.

Based on the predicted rising cost of power, locking in long-term power prices via a PPA allows customers the opportunity to save (or even make) money in the future.

 Acting in line with clients

Investors are increasingly recognizing climate change as a risk for businesses, both now and in the future. As a result, the biggest companies in the world are placing an increased focus on mitigating climate risk, with renewable energy being a main avenue for achieving this goal. 10% of global fortune 500 companies have public renewable energy targets, with the number of companies making commitments continuing to accelerate.financial services

Financial institutions, such as Citigroup, are also committing to renewable energy to reduce their environmental  impact, and stand by their clients as they set ambitious goals for carbon reduction. Citi’s CEO, Michael Corbat, whose company announced its plans to transition to 100% renewable energy in September of 2017, explains, “”We are right alongside our clients in supporting the growth of renewable energy development and production”. Going further, Citi is committed to “continuing to provide financing for our clients’ renewable energy and energy efficiency projects around the world.” Commitments to renewables by financial institutions help other companies accelerate their own pursuit to adding new renewable energy to the grid.

Future-proofing decentralized operations

Financial institutions tend to have dispersed load centers. This decentralization of operations, with banks often being spread across multiple electricity grid regions, makes financial, or virtual PPAs an attractive solution to meeting ambitious carbon-reduction and renewable energy goals.  Because an offsite virtual PPA does not require direct delivery of power to facilities, many companies use them to reduce operational emissions across multiple load centers, lock in a known price for power, and generate long-term cost savings for the business.

Reputation and leadership

Consumers look for a financial services firm that is well-represented and trustworthy. Engaging in renewable energy sourcing sets a company apart for being innovative and responsible. In this industry, brand value is important both for the company as well as their customers. Renewable energy PPAs are a transparent and effective way for financial services companies to gain a positive customer reputation, achieve large-scale renewable energy goals, and serve as a proactive leader in the industry for climate action. PPAs also present financial service companies the unique opportunity to demonstrate additionality in the market, as they allow a company to play a pivotal role in the development of new wind or solar facilities.

Providing Key Investment to Renewable Project Developers

Financial Institutions are uniquely positioned to not only benefit as an offtaker of renewable energy via a PPA, but also to provide financing that developers need to get these large-scale projects up and running. This opportunity for direct project investment is not only a good business opportunity for financial institutions, but also allows these companies to play a pivotal role in supporting the development of new renewable power and accelerating a low-carbon economy. Despite the shifting tax and regulatory landscape, financial institutions are deploying more capital than ever to finance the development of large-scale renewable energy projects.

Financial Services Companies Taking Climate ActionRE100 fin services

Financial services companies are extremely well represented in global commitments to renewable energy. In the RE100, financial services represents 17% of companies making commitments to sourcing 100% renewable energy by 2020.

Furthermore, in the U.S., there are over 30 banking and financial services companies participating in the EPA’s Green Power Partnership program, with the majority of them reporting 100% renewable energy use or greater.

Though participation in large-scale procurement via PPAs in this industry has been limited thus far, there are several examples of financial services companies going above and beyond with their energy procurement strategies.

Financial Service Companies Doing Power Purchase Agreements

In 2017, major financial institutions, Goldman Sachs and JP Morgan, committed to long-term renewable energy deals becoming the first multinational banks to execute PPAs. The companies collectively signed 143 MW of wind power, building upon early deals signed by Bloomberg and HSBC. This uptick in 2017, as well as interest we have seen from our own clients, indicates that this strategy is picking up pace in the financial services industry.

Both Goldman Sachs and JP Morgan are expected to continue procuring more renewable energy, as indicated by both companies’ aggressive renewable energy targets. JP Morgan recognized that this PPA is just the first step toward reducing the firm’s traditional power consumption by 40% and demonstrated clear intent to sign additional PPAs.

How Schneider Electric Can Help

Schneider Electric’s Cleantech Team has a long history of supporting financial services companies achieve their renewable energy and carbon reduction goals, using a variety of strategies, including energy attribute certificates (EACs), carbon offsets, onsite solar, and power purchase agreements. Many of which are recognized leaders in the aforementioned Green Power Leadership Program.

One leader in the space, TD Bank, worked with the Schneider Electric-Renewable Choice team to develop and execute a successful three-tiered strategy to achieve their sustainability goals under a very short timeline. By combining several elements of Active Energy Management—energy efficiency retrofits, purchasing EACs and carbon offsets, and installing onsite solar—the company has avoided over $600,000 in utility expenses and the carbon equivalent of burning of more than 850 million pounds of coal.

If your team is experiencing these or similar pain points in your pursuit to accelerate renewable energy goals, please get in touch with us today.

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