Author: Amy Haddon shares her expertise in the renewables market and corporate sustainability.
There’s been recent speculation regarding the reason that corporate renewables uptake is slowing down; 2016 power purchase agreement (PPA) commitments are not on pace with 2015 (although announced deals have already surpassed 2014 totals). The slowdown is almost certainly attributable to the Production Tax Credit (PTC) cliff. Approaching the sunset of the PTC last December, many companies drove full speed at getting a PPA done before the end of the year, while others took a wait-and-see approach. As a result, there were a record number of deals signed in Q4 of 2015, while many PPA processes initiated in Q1-Q2 of 2016 are only now coming to fruition. As a result, we expect a flood of deals to be announced by year-end and into Q1 2017.
Despite speculation and the slowdown, there are 5 reasons we remain fully confident in the long-term strength of the commercial, industrial, and institutional (C&I) renewables market:
- There are lots of PPA deals in the works.
It can be difficult at any point in time to assess the size of the market, as it can take 6-12 months to fully execute a PPA, and some buyers do not publicly announce their deals even when they are finalized. Nonetheless, based on what we know from our own network—and what we hear from our competitors—there are many companies deeply engaged in the PPA process. While deals are not assured from every one of these buyers, we remain confident that many deals will close, pushing the 2016 total close to that of 2015 and giving 2017 an early boost.
- Deals are getting done by non-F500
Early adopters of the PPA model were primarily Fortune 500 companies, most of which have high electricity demands. However recently, non-F500 companies, including smaller publicly held companies and more private companies, began entering the PPA space. For example, this year, Iron Mountain, a F1000 enterprise information management services company, did its first PPA. Going forward, we anticipate seeing more and more companies getting on board with large-scale renewables—and smaller companies taking advantage of emerging deal structures using aggregation.
- Interest remains high
In the weeks’ post-election and COP22, there has been continued vocal support from the C&I sector for the Paris Agreement, the continuation of the PTC/ITC, and renewables generally. Companies have made it clear that they see clean energy as the path forward to a prosperous future, and the PPA deal structure is one of the most advantageous ways for them to leverage the renewables market.
- Economics remain favorable
With or without the PTC/ITC, the economics of PPA deals remain favorable for non-utility offtakers. Even if these subsidies are repealed under the new administration, thousands of turbines have been “safe harbored” in 2016, allowing for these favorable economics in wind to continue for the time being.
- International markets are growing
Even if we experience a slowdown in the U.S. C&I market under the new administration, many corporations are already looking beyond our borders. Favorable economics and governmental incentives in Mexico, regions of India, and increasingly in Europe, Australia, and South America mean that U.S corporates are no longer confined to stateside deals.
Renewable Choice has been moving the market forward for more than 15 years and does not view this year’s slowdown as a setback. If anything, we see a next wave of buyers on the horizon that will surpass all previous expectations as companies continue to embrace and promote carbon and climate responsibility.
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