Corporate Renewables Procurement Accounted for Nearly a Quarter of All Deals in 2018

A recent report affirms that corporations have carved out a prominent position in growing the renewable energy market. According to research firm Wood Mackenzie Power & Renewables, corporate contracts accounted for 22 percent of 2018 power-purchase agreements for renewables in the U.S.     

WoodMac’s conclusions affirm a handful of findings that credit large corporations with pushing the solar and wind industries forward in 2018. The Business Renewables Center at the Rocky Mountain Institute, the American Wind Energy Association, and Bloomberg New Energy Finance have also reported that last year was an annual record for companies purchasing solar and wind energy.

The dramatic rise in corporate deals puts the sector on par with solar purchases driven by renewable portfolio standard policies, according to Colin Smith, senior solar analyst at WoodMac.

“On the solar side, 2018 was a banner year in part driven by pent-up demand caused by the tariffs,” said Smith. “Commercial and industrial procurement was a large percentage of solar PPAs signed in 2018.”

According to WoodMac’s numbers, the United States now has over 8.8 gigawatts of wind and solar capacity tied to corporate and industrial customers.

Source: Wood Mackenzie Power & Renewables

The research firm puts the current pipeline of projects at over 6.8 gigawatts and forecasts that projects in development could top 10 gigawatts by the end of this year.

Between 2017 and 2018, procurements grew 109 percent. Analysts at WoodMac attribute that increase to procurement of solar power. Though C&I deals have historically prioritized wind, more companies are now looking to solar deals and their increasingly favorable economics. Capacity brought into operation in 2015 and in the years before included 4,332 megawatts of wind and just 985 megawatts of solar. Last year, the capacity breakdown was 3,360 megawatts of wind and 2,455 megawatts of solar brought online. 

Beyond 2019, analysts expect corporate procurements to continue to grow, helped along by factors such as increasingly favorable contract terms and sustainability goals.

Smith said the trappings of more favorable contracts, like insurance products and load-tailored PPAs, are an indication that the market is working to meet consumer needs. Innovative deal models, like aggregation, have also opened the market for companies of different sizes. 

“Developers are trying to make it easier for C&I offtakers to sign PPAs by making them easier to understand, getting corporations comfortable with the risks, and also engineering new ways to make the contracts less risky,” said Smith. “As developers innovate more ways to sign PPAs, we will see the C&I market continue to grow.” 

The flexibility that’s coming to contracts and the growing comfort companies have with energy procurement has also drawn a slew of new buyers into the market.

The number of new entrants to the market has steadily grown in the last three years. The number of repeat C&I buyers is also growing as big players like Facebook and Microsoft do more and more deals.

As the federal Investment Tax Credit steps down, Smith said it could take a slight bite out of the quickening pace of corporate procurement growth.

“Companies often buy when they believe they can get the best deal. Right now, corporations see low cost of capital and see that they have a year left to sign a PPA that can take advantage of the ITC before the stepdown,” said Smith. “After that, we will see relatively fewer C&I PPAs announced.”

The loss of that incentive won’t completely halt the trend, however, as price drops, favorable contract structures and corporate sustainability pledges continue pushing the market forward.  

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