Corporate renewable energy purchasing is in full swing. Globally, 126 companies have pledged to join the RE100 and source 100% renewable energy, and in 2017 in the U.S., corporations signed power purchase agreements (PPAs) for 2.9 GW of renewable energy.
However, a disconnect can exist between the companies who want to procure clean power and the developers who generate it. The shift from the traditional corporate approach of passive energy purchasing from local utilities to an active energy management strategy puts pressure on developers to transform their business. Understanding the needs of increasingly sophisticated commercial, industrial and institutional (C&I) energy buyers is critical to the wide-scale adoption of renewable energy—not to mention future developer success—and can be achieved by finding common ground between corporate buyers and renewable energy developers.
Understanding market challenges and motivators of C&I buyers
Though organizations have been setting and achieving sustainability goals for many years, there is immense pressure to achieve more with fewer resources. For example, C&I buyers with renewable energy goals used to solely procure energy attribute certificates (EACs) to meet their renewable energy targets. Today, increasing corporate demand for renewable products and aggressive state RPS targets in the U.S. are compressing the availability (and price) of EACs. What used to be a standard procurement process has become increasingly strategic, so C&I buyers are more eager to explore innovative solutions like PPAs to meet sustainability and economic goals. Renewable energy developers must be willing to respond to this need by providing innovative, cost-effective, and low-risk clean energy product solutions.
Additionally, companies and NGOs alike are calling out laggards in the space, accelerating the pace at which C&I buyers seek renewable energy solutions. A recent example of this is T-Mobile: alongside the recent announcement of their ambitious commitment to 100% renewable energy, Magenta Goes Green, the company’s CEO called out their competitors, challenging the entire U.S. wireless space to make similar commitments by June 1, offering to donate as much as $1.5 million to clean energy campaigns and projects if their competitors committed. This kind of pressure pushes companies to adopt renewable energy faster, so developers must be prepared to serve the increasing appetite of this market.
Another challenge for corporates is that the cleantech market overall is getting busier and more complicated. Greater competition means more opportunities to fulfill goals. But competition also means the noise in the market can be deafening for corporates who have made public commitments to procuring renewable energy. Making decisions is an increasingly complex task. The competitiveness of a developer’s project offer is of utmost importance in cutting through this noise.
While project competitiveness and price are at the top of the agenda for corporates, these buyers typically have additional drivers that contribute significantly to the clean energy projects they choose. On top of market challenges, developers must understand that C&I buyers have additional priorities that are distinct from the traditional economic-driven decision-making model. These drivers range from achieving sustainability goals to energy supply diversification to risk management, among others. Developers need to be sensitive of these motivators and careful not to assume they know the answers, because drivers are unique to each C&I organization. A corporate pursuing renewable PPAs does not expect a purely transactional interaction—they place a high value on the human element of partnering with a developer they can trust. It is therefore imperative that developers respect these priorities by being flexible in their terms and asking the right questions of the C&I buyer to truly understand their needs.
New technologies and access to information
With the introduction of new energy opportunities like onsite solar, energy storage, fuel cells, and microgrids, the question of whether to invest in cleantech has, for many organizations, transformed into how and when. Distributed energy resources are becoming more prevalent in companies’ power portfolios due to the dropping costs of these technologies, and the powerful opportunity for decentralization. With new technologies, companies are taking control of their energy strategies, and are moving away from the centralized, utility-based energy structure as we know it.
To remain relevant through this transition, utilities and renewable energy developers will need to step up their game when it comes to innovative combinations of technologies and renewable energy solutions. For example, in Queensland Australia, Windlab and Vestas are developing a first of its kind solar-plus-wind-plus-storage project, expected to be more resilient and flexible than individual standalone solutions. Further, the expected proliferation of electric vehicles and fleet electrification make hybrid generation solutions increasingly important.
In addition to new technologies, C&I buyers today have increased access to expert market analyses and information. Non-profit organizations, such as the Business Renewable Center in the U.S. and Re-Source in Europe, provide C&I buyers introductory information and the basic educational materials they need to kick start a renewable energy procurement program. Taking it a step further, platforms such as NEO Network provide deeper market intelligence, access to guidance from energy experts, and detailed information about current market opportunities and available projects and clean technology products. These tools enable technology-based decision making for corporates considering a wide range of new energy opportunities. With market data and indicative project price information at their fingertips, C&I buyers are more educated on their options than ever before.
Some developers may be hesitant to engage with C&I buyers. But at the pace that corporate renewable procurement is accelerating globally, developers and utilities are left with a clear choice: get in the game or get left behind. Finding the common ground between developers and C&I buyers will require an understanding of the challenges and risks these customers face and the unique goals they are looking to achieve.
To learn more about the unique challenges faced by C&I buyers, and how Schneider Electric’s NEO Network can support renewable energy developers in honing their understanding of this new market, contact us.