Anyone watching the current explosion of demand for renewable power from companies like Facebook, Walmart and even ExxonMobil may have questioned: How far can this go?
Much, a lot additional, is the brief reply. For all its current features, the company renewables market is probably going in its very early innings, in keeping with a new analysis from Wood Mackenzie and the American Wind Energy Association (AWEA).
Among the 1,000 largest American corporations by income, the penetration of renewables stands at simply 5 % of their power combine, the report finds. That leaves as a lot as 85 gigawatts of potential renewable energy demand inside the Fortune 1000 via 2030. And that is only for U.S. corporations.
Nearly 200 companies globally have pledged to go 100 % renewable under the RE100 initiative, and a few, like Google, now purchase extra wind and solar power than many massive utilities. Still, in the U.S. alone “there are hundreds of companies that exist in the Fortune 1000 that have not made pledges to that level,” mentioned Dan Shreve, head of worldwide wind energy analysis at Wood Mackenzie.
It’s unlikely that every one of that demand can be met by wind and solar, and positively not inside the subsequent decade. But by trying past the fixed drumbeat of splashy company renewables bulletins, lots of them gentle on nuance and element, the report reveals the scale — and challenges — of a market that will solely be scratching the floor.
“There’s an enormous opportunity remaining,” Shreve mentioned in an interview. “We view commercial and industrial demand as a centerpiece of our market outlook moving forward. It’s a terribly important sector that’s going to drive demand in the absence of any federal policy associated with renewables.”
Goodbye to the PTC
Several elements have fueled company demand for renewables in the U.S., a few of which expose potential vulnerabilities for the market going ahead.
The most essential is the exceptionally low value of wind power in elements of the nation, alongside ever-lower costs for utility-scale solar. Wind power-purchase settlement costs fell final yr to a mean of $16 per megawatt-hour in Texas’ ERCOT territory, the largest marketplace for company PPAs, WoodMac says.
In a world of rising electrical energy costs, it is no marvel that power-hungry companies like AT&T, Amazon and Apple have taken the time to turn into specialists on renewables procurement.
Such low-cost offers are attainable thanks partially to federal subsidies, with the federal wind Production Tax Credit value an inflation-adjusted $24 per megawatt-hour for 10 years at its full stage.
The multi-year PTC extension secured in 2015 performed a central function in shaping the fashionable company renewables market, Shreve mentioned. With an unprecedented four-plus years for wind builders to gestate, market and assemble wind farms that certified for the full PTC, companies had the time to “dig in and perceive the potential alternatives when it got here to the acquisition of green power.”
The market’s flip towards company offers coincides with development of one other sort of offtake construction: the service provider hedge contract. Hedges give project homeowners a level of income stability when promoting into cutthroat wholesale markets.
The simultaneous rise of company offers and hedges displays the challenges builders face in securing conventional utility offtake offers amid a wave of renewables initiatives coming on-line throughout the nation. Together, company offers and hedges accounted for 42 % of the wind capability constructed final yr, almost as a lot as that procured by utilities.
Shreve mentioned company offers will stay very important to the wind market even because it contracts after the PTC’s ultimate years.
Solar’s large second
Another large change coming for the company market is the rise of solar energy.
Solar is prone to eclipse wind as the technology of alternative for many company offers by the early 2020s. That’s due not solely to a extra favorable phaseout schedule of its major subsidy, but additionally to the inherent financial benefits in its technology profile, with solar’s pure noon output extra useful to most corporations.
That actuality, as a lot as some other, hangs over the wind market’s future.
“Wind and solar are stronger in different parts of the country, so states must ensure they have competitive policies and adequate transmission infrastructure to attract investment in the renewable projects and business activities that they will power,” mentioned AWEA CEO Tom Kiernan, in a press release.
One of the company market’s largest alternatives is discovering a option to crack into the nearly untapped base of smaller corporations with out the load or inner sources to enroll in large renewables offers, typically finished via digital PPAs.
Of the almost 30 million companies in the U.S., greater than 99 % fall into the “small” dimension designation. Even bigger companies could discover it cumbersome to supply renewables if they’ve a number of websites scattered throughout a number of areas, as is the case with many retailers.
The best answer for a lot of smaller corporations can be offsetting their emissions by shopping for renewable energy credit. The value of such credit is predicted to crash by the late 2020s as many states blow previous their renewables targets.
But even smaller corporations more and more need to be sure that their renewables purchases are enabling new wind and solar farms to get constructed, Shreve mentioned.
Utilities the key?
There have been successes in aggregating demand from smaller company patrons and getting large offers finished. Some builders are “moving more and more into a role as a power marketer and aggregator, cultivating demand from smaller buyers and breaking up these plants into smaller agreements,” Shreve mentioned.
Still, nobody has discovered the “cookie-cutter approach” that works nicely for each would-be company offtaker. Ultimately, the rise of utility green tariff packages holds the most potential, he mentioned. Such packages see utilities providing corporations the likelihood to purchase power from a particular wind or solar project at a particular fee, via what is named a sleeved PPA.
“Utilities hold the key to unlocking that second tier of green power demand,” Shreve mentioned.
Wind and solar builders could not love utilities stepping in and turning into the go-to homeowners and retailers of renewable power. But the market could not give them a alternative in the future.
In a world the place companies of all sizes and styles are embracing renewables, “I think there’s plenty of opportunity to go around,” Shreve mentioned.
The report’s free 40-page govt abstract is obtainable for obtain here.