Businesses Large and Small Are Coming Clean

One of the more encouraging trends for renewable energy development has been a crucial shift in incentives for businesses to choose clean energy. Over time, significant attention has been paid to government mandates, worldwide, that seek to ensure a net zero future. But two key forces, entirely unrelated to government policy or regulatory activism, are combining to transform access to clean energy for any business that wants it. 

The first is basic economics: as we’ve written previously, we’re at a tipping point where solar energy is a cheaper source of electricity than fossil fuels. The second, and arguably more powerful trend, is that businesses are seeking to operate using clean energy as a cornerstone of their broader Environmental, Social, and Governance (ESG) responsibilities. The management teams of many companies Candela has worked with are themselves looking to address sustainability concerns not only at their own enterprises, but within their categories and throughout their ecosystems – and importantly, they’re not waiting for governments or regulators to lead the way.

This increasing awareness of the necessity to be not just responsible stewards of shareholder capital, but good stewards of their communities and the environment, has led companies both large and small to seek ways to reduce their carbon footprints. There’s no better place for a business to start than ensuring the use of renewable energy.

Candela helps our corporate customers who want to ensure not just access to power, but access to clean power, look to execute Power Purchase Agreements (PPAs) specifically designed to spur the development of renewable energy infrastructure (a good example: the PPA we executed last summer with Google). Large technology companies in many cases have become some of the biggest PPA transaction partners in recent years, given the power demands of maintaining vast server farms or providing hyperscale cloud services. 

But, while there are thousands of companies that want to commit to carbon neutrality, not many companies have the energy consumption profile of Apple, Google, or Amazon, and certainly not many companies have the same balance sheets. What if, as recently happened, the owners of a small, artisanal bourbon distillery wanted to make certain all the power they used was clean?

Encouragingly, recent innovations in how PPAs are executed allow for a much broader constellation of businesses to directly influence the creation of renewable energy generation. 

A key development is that “Virtual” PPAs now offer significant flexibility for buyers and developers alike. Virtual PPAs allow energy buyers to enter into a financial, vs. physical, contract with a renewable energy project. The Virtual PPA gives the buyer of energy all the benefits of a physical contract, while avoiding its constraints (primarily, needing to co-locate a generation facility so it is directly proximate to the company itself).

A further development that is meaningful: as Virtual PPAs become more prevalent, they are also being structured such that multiple companies can come together as buyers. Smaller companies, or any enterprise that simply don’t use enormous amounts of energy (such as a bourbon distillery), can now guarantee a supply of clean energy for themselves and spur the development of renewable infrastructure.

This is important for many companies, and equally, their own shareholders and customers. Investors are increasingly asking that management teams formalize and specify their commitments to ESG principles, and using only clean energy is a clear way to do so. Equally, as consumers everywhere turn their focus to the processes that bring products to market (e.g. fair labor practices, ethically sourced raw material) as much as the products themselves, being able to directly point to 100% clean energy use isn’t just good for the environment: it’s good for business.

The combination of these innovations, which bring flexibility and opportunity to participants in the renewable energy space are welcome, and working: the Renewable Energy Buyers Alliance (or, “REBA”) tracks US-based utility scale corporate energy procurement, and the acceleration in purchases over the last few years is remarkable: a roughly 10x increase from 2016 - 2020.

At Candela, we’re excited: thanks to ongoing innovations in how solar projects are contracted and developed, the ability of smaller and smaller companies to seek highly customized solutions and access to clean energy is only increasing.

#     #     #