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Are Aggregated Renewables Right for Your Company?

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This is the third in a series of blog posts co-developed by Schneider Electric and RILA about renewable energy options for retailers. To read the first on the opportunity for onsite PPAs, click here. To read the second on owned onsite systems, click here.

As retailers look to reduce their environmental footprint and grow renewable energy investments, understanding the ever-changing renewables procurement landscape can be challenging. That’s why RILA is developing a new renewable energy guide, which highlights fundamentals of different procurement options and key considerations, specifically for retailers. In this excerpt from the guide, we discuss the opportunity for collaborative renewables sourcing.

What is collaborative sourcing?

Collaborative renewables sourcing allows retailers to take advantage of power purchase agreements (PPAs) they might not be able to otherwise.

Aggregated PPA deals allow multiple buyers to participate in the market by banding together as a joint venture consortium to reach the size or capital needed for a long-term PPA.

A joint tenancy model allows buyers to enjoy the benefits of a portion of a PPA agreement with an anchor tenant. The anchor is usually the primary tenant taking most of a project that another buyer can participate in. Alternatively, under a reseller PPA model, a large buyer purchases a project and divides it into more flexible and smaller segments.

What are the key benefits?

Aggregated PPA deals are ideal for smaller buyers who are interested in the benefits of a PPA, but may be less creditworthy, have less capital to invest, and are more risk averse, but still have the interest in adopting a renewable energy agreement. These buyers may have an interest in gaining benefits such as fixed price for power and emissions reductions.

Aggregated PPAs have been implemented successfully through conglomerates, such as George Washington University, American University and George Washington University Hospital for a 52 megawatt (MW) solar PV project in Washington, D.C. In 2016, the Dutch wind consortium negotiated two long-term offsite PPAs for a total of 136 MW.

Microsoft also recently announced a new solar deal in Virginia where Microsoft serves as an anchor tenant for a project but allows other buyers to buy smaller portions of the output at a competitive price.

Are aggregated PPAs right for you?

Advantages:

  • Flexibility for constrained companies
  • Lower credit or shorter contract options
  • Potential for easier, faster execution (resold PPAs)

Downsides:

  • Execution complexity (aggregation)
  • Full PPA execution (joint tenancy)
  • Less negotiation flexibility (resold PPA)
  • Environmental and additionality claims (joint tenancy; resold PPA)

Ready to move forward?

Like any renewable energy initiative, engaging company stakeholders is crucial to get buy-in and ensure there is a thorough understanding of the deal structure, benefits, risks and implementation. Stakeholder groups that should be involved include a renewable energy buyer’s advisor, such as Schneider Electric, accounting/auditing, tax advisors, and internal as well as external legal counsel.

To learn more about collaborative renewables sourcing, if it's a viable option for your company, and next steps for moving forward, access the full chapter in the renewable energy guide here and all the chapters published so far here.