The end of 2017, heading into 2018, was a precarious time in renewable energy. A confluence of factors—including a solar manufacturing trade case, power market rule changes, corporate tax reform, and rumors of impending industry-hampering tariffs—left many feeling insecure. Corporate energy buyers were among the uncertain. What would these changes do to the price of virtual power purchase agreements (PPAs), or renewable energy certificates (RECs), the two most common means companies use to buy renewable energy?
To some, early 2018 felt like it could be a disastrous turning point for the renewable energy industry. There were dire predictions about how these regulatory and trade constraints would affect project prices, jobs and the availability of panels and turbines, and many were preparing for the worst. Like the scene at the end of Apollo 13, everyone in the control room was sure that the astronauts aboard would not survive their reentry into Earth’s atmosphere, but there was a pillar of hope. Amidst the uncertainty and volatility that characterized the beginning of the year, corporate buyers forged ahead with their goals and commitments, making 2018 our finest hour for renewable energy.
In retrospect, while tariffs in particular have had a negative impact on the wind and solar industries, corporate buying was not hampered. On the contrary: corporations absolutely smashed previous purchasing records, buying 6.43 GW of wind and solar power PPAs and millions of kilowatt-hours of RECs in the U.S. alone. This is equivalent to over 18 million acres of forest land - approximately the size of the state of South Carolina.
And they show no sign of slowing down.
What made the difference in 2018—and what does that predict for corporate renewable energy purchasing in 2019?
1. Renewables are cheaper. Period.
In energy purchasing, money talks. And these days, the lowest levelized cost for energy is often wind or solar. A 2018 IRENA report found that solar and onshore wind are already the lowest cost sources of energy, and advocates in the wind power industry say that wind is ready to stand on its own without subsidization; welcome news in the face of the 2019 expiration of the U.S. Production Tax Credit.
The result is a blurring of the lines between so-called brown and green power. In 2019, we expect that these lines will get even blurrier, as energy procurement begins to shift from a segmented, passive activity, to a holistic, active view based squarely on cost rather than generation type.
2. Goals are a powerful force.
Nearly 500 companies have set a science-based carbon reduction target (commonly achieved with a combination of energy efficiency and renewable energy), while over 155 have committed to source 100% renewable electricity via the RE100 initiative. 100 cities in the U.S. have also committed to 100% renewables, and in December, Xcel Energy—which serves customers across an eight-state region—announced that it has committed to 100% zero-carbon electricity by 2050.
Reaching goals, especially the 2020 thresholds many companies are aiming towards, can be a significant motivator. In 2019, we anticipate seeing new companies set goals and companies that are about to reach their goals setting new ones to maintain a position of leadership and innovation.
3. Companies (and their stakeholders) are taking climate change seriously.
2018 was a watershed year for climate awareness. First, Larry Fink issued his call to action to companies, insisting that purpose and responsibility must play a key role in any organization’s long-term strategy. Then, sensitivity to the impacts of global warming was heightened through one of the hottest summers on record, leading to record-breaking wildfires throughout California and Colorado. And finally, the issuance of the IPCC’s Special Report on Global Warming created a new sense of urgency for climate action previously unrealized.
Climate change—and its potentially devastating effects—is no longer relegated to the shadows. It’s taking front-and-center in the C-suite and the boardroom as companies contend with the risks to resilience and business continuity it poses. In 2019, we expect to see corporate action and urgency on climate change to increase, as companies fully embrace the implications of the IPCC report and recommendations for action resulting from COP24.
The bottom line in 2019?
2019 corporate renewable energy purchasing could be even bigger than the record-breaking year we saw in 2018. Building upon momentum sparked in 2018, and the drive to achieve 2020 goals, corporate renewable procurement is predicted to continue to be a strong focus this year. You can be part of the movement in 2019.
A great first step is our NEO Network. Membership is complimentary for any qualified commercial & industrial buyer through the Accelerator Access program. Inside NEO Network, companies can learn more about how to develop their renewable energy strategy and get started with the support of our team of experts and industry solution providers.