BIG COMPANIES ARE AMERICA’S HUNGRIEST WIND AND SOLAR POWER USERS
Major US corporations such as Wal-Mart Stores and General Motors ( GM) have become some of America’s biggest buyers of renewable energy, driving growth in an industry seen as key to helping the United States cut carbon emissions.
Last year, nearly 40 per cent of US wind contracts were signed by corporate power users, along with university and military customers. That is up from just 5 per cent in 2013, according to the American Wind Energy Association trade group.
These users also accounted for an unprecedented 10 per cent of the market for large-scale solar projects in 2016, figures from research firm GTM Research show. Just two years earlier there were none. The big reason: lower energy bills. Costs for solar and wind are plunging thanks to technological advances and increased global production of panels and turbines. Coupled with tax breaks and other incentives, big energy users such as GM are finding renewables to be competitive with, and often cheaper than, conventional sources of electricity.
The automaker has struck deals with two Texas wind farms that will soon provide enough energy to power over a dozen GM facilities, including the US sport utility vehicle assembly plant in Arlington, Texas.
The company is already saving $5 million a year worldwide, according to Rob Threlkeld, GM’s global manager of renewable energy, and has committed to obtaining 100 per cent of its power from clean sources by 2050.
Growing corporate demand for green energy comes as US President Donald Trump is championing fossil fuels and targeting environmental regulations as job killers. This month he announced the United States will withdraw from the landmark Paris Agreement to fight climate change, a move that was condemned by several prominent US executives, including General Electric Chief Executive Jeff Immelt.
Trump’s administration, however, has made no moves to target federal tax incentives for renewable energy projects, thanks mainly to bipartisan support in Congress. Many Republican lawmakers hail from states that are major solar or wind energy producers, among them Texas, Oklahoma and Iowa.
US companies, meanwhile, are pursuing their own clean-energy agendas independent of Washington politics. Over the past four years, corporations have contracted for about 7 gigawatts of renewable energy — enough to power more than 1 million homes. That number is expected to rise to 60 GW by 2025, according to the Edison Foundation Institute for Electric Innovation, a utility-backed nonprofit based in Washington D.C.
Growth in renewables for years was driven by utilities working to meet tough state mandates to reduce carbon emissions, particularly in places such as California. Wind-power costs have dropped 66 per cent since 2009, according to the American Wind Energy As- sociation, while the cost to install solar has declined 70 per cent since 2010.
This year alone, home improvement retailer Home Depot, wireless provider T-Mobile US, banker Goldman Sachs and food producer General Mills announced major purchases of renewable energy.
Power to the PPA
Such deals can take many forms, but most are so-called power purchase agreements. Known as PPAs, these are roughly 10-to-20year contracts in which the owner of a large solar or wind project sells electricity to large customers, often at rates lower than those charged by utilities. These agreements allow energy users to buy renewables at attractive prices with no upfront investment.
These agreements also help companies avoid outages if the sun doesn’t shine or the wind doesn’t blow. The massive wind farms and solar plants that support these contracts often supply electricity straight to the grid rather than feed it directly to corporate customers’ plants and offices. Companies get the benefit of clean energy without cutting themselves off from the security of the grid.
Furniture retailer IKEA is a notable exception to the PPA trend, preferring to own the renewableenergy assets that serve its US business, including rooftop solar systems on most of its buildings and two wind farms in Texas and Illinois. The approach is part of the Swedish company’s long-term corporate strategy of owning all of its stores, factories and the land on which they’re built.
Demand from big corporations has benefited a host of wind and solar developers including Pattern Energy, First Solar and NextEra Energy.
The developers or owners of the projects, meanwhile, get the stability of long-term contracts plus those federal tax breaks. The solar credit is worth up to 30 per cent of a project’s value. For wind, the most popular tax credit is a maximum of 2.4 cents per kilowatt-hour of electricity produced for a decade.
Ambitious goals
Since 2014, nearly 100 large global companies have committed to transitioning to 100% renewables through a partnership with The Climate Group, a nonprofit that’s working to reduce greenhouse gas emissions. Many big firms remain on the sidelines because they lack an overall corporate sustainability mandate, view renewables as having unattractive returns or because the contracts are too long, according to a 2016 PricewaterhouseCoopers survey.
Many small- and medium-sized businesses have a hard time benefiting too. Smaller projects, such as installing rooftop solar panels, tend to depend heavily on state and local incentives that come and go.
The 2020 expiration of the federal tax incentives is another concern. But industry watchers expect US companies will continue their ambitious public commitments to boost renewable energy use even if those breaks aren’t renewed.